Budget restoration of exemption from capital gains tax on property owned for 25 years welcomed

Feb 21, 2021 Consumer Concerns, News

By Pat Dial

Kaieteur News – In simplistic terms, Capital Gains tax is a 20% tax on the amount a seller receives over and above what he had paid for the property. For example, if he had bought the property for $100,000 and sold it for $130,000 he would have gained $30,000 more than for what he had bought the property and it is this $30,000, which is the gain and is subject to a tax of 20%.
Until a few years ago, if a seller owned property for 25 years and over, then he/she was exempted from paying capital gains tax. The last Government abolished this 25-year rule and all property, no matter how long one would have owned it became subject to capital gains tax.
In the case of the abolition of the 25-year rule, its negative effects were not immediately seen or felt but only began to make its impact afterwards. For although it appeared to be of comparatively small significance, its social and economic effects were immense.
Mr. Nicholas Boyer, the Chairman of the Private Sector Commission, on behalf of the Private Sector, petitioned the Government to reinstate the 25-year exemption from taxes on Capital Gains. He pointed out that the removal of the Capital Gains tax exemption on properties owned for 25 years and over “not only affected the construction and real estate industries but also the desire to invest in real estate and to hold real estate on a long-term basis.” He also pointed out that though countries around the world have Capital Gains tax, “they all have such an exemption in order to encourage investment into real estate.” He also pointed out that the removal of the 25-year exemption from capital gains tax would encourage tax evasion: “It also incentivizes people not to report the correct sales figures and to try to find illegal ways of getting around the taxes and this is something we do not want.”
Dr Jagdeo, when in Opposition, remarked on the removal of the 25-year exemption on Capital Gains: “All the older folks who own their buildings across Guyana would not have had to pay capital gains tax if they had sold their property before now.”
The consumer community is in full support of the Private Sector on this issue, since, when the construction and real estate industries are expanding and are prosperous, more employment is created and more wealth is generated in the society. However, the consumer community also supports the reinstatement of the 25-year rule because it will bring justice to poorer property owners:
After Emancipation, the freed slaves left the plantations and settled in various parts of the coast and in the vicinity of Georgetown. Their settlement in the coastal areas is known as the Village Movement, where the freed men founded various villages such as Buxton while those who settled in the vicinity of Georgetown mostly occupied the bush-covered belt south of Brickdam. In this area, they and their descendants cleared the land, drained it and acquired house lots. They filled up their yards against flood, maintained their mud roads and painstakingly built their cottages or ranges. The same pattern was followed by the indentured immigrants when their indenture period had expired and they settled in areas such as La Penitence and Campbellville.
The lots acquired by these original settlers and their descendants and friends remained in their hands and today when they decide to sell them because of old age or because their families would have emigrated, they are offered higher prices than their ancestors paid. Their higher prices were due to their improvements, inflation and currency devaluations over the years and not because of speculation. Indeed, they probably barely broke even with such sales and to demand Capital Gains tax from such people verges on the confiscatory. The reinstatement of the rule exempting owners who have held their properties for 25 years and over from payment of capital gains tax is fair and just.
In reporting on the Budget, the media have so far given no notice to this measure because of its apparent insignificance as against the bigger and fundamental issues, but its social and economic effects are far-reaching and important.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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