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PROPERTY TAX AND PERMANENT RESIDENCE

As Anguilla's villa rental industry has grown and flourished, and as high-end villa rentals have begun to compete directly with hotels in terms of amenities and price, it is an opportune time to consider the impact of this decentralized villa rental activity on Anguilla's economy in general and on real estate in particular.

Over the past number of years, there has been a substantial increase in the construction of grand homes and elegant villas on island-primarily built on coastal property, normally rocky foreshore. The current growth of high-end residential development has been fueled by the same factors that initially fueled the growth of high-end hotel development-a civilized quality of life, an acceptable proximity to North America and Europe, and (of course) pristine beaches. In fact, many of the individuals who have built elegant villas on island were initially introduced to Anguilla by our high-end hotels-a logical evolution, especially given the increased value of most individual stock portfolios over the last few years.

The vibrancy of the villa rental industry bodes well for Anguilla's economy in numerous ways. Villa rentals foster the purchase and sale of real estate--in undeveloped land for new construction, and in existing homes for renovations. Villa rentals help to diversify the tourism product with in the high-end market by providing additional avenues for those famous faces that require maximum privacy and for those extended families that require personal communal space. Villa rentals also provide increased employment opportunities in the service and construction sectors, and their decentralized character helps to generate entrepreneurial activity and foster support for local retail efforts.

However, even with the above benefits in mind, the question remains as to whether or not villa owners are doing their fair share--with particular reference made to the proper payment of accommodation tax. This question must be addressed boldly, not only because the perception of fairness is important to the Government's continued support of the villa rental industry, but because we should all strive to improve Anguilla's current system of consumption and use taxation rather than invite taxes on wealth and savings.

Whereas accommodation tax is a viable concept with regard to centralized hotels whose sole reason for existence is to attract paying guests, the concept is very difficult to monitor on the villa front-and this very difficulty leads to questions of propriety and to temptations of silence. It is extremely problematic, if not impossible, to fairly and unobtrusively differentiate between personal use and commercial use of a private home-and this virtual impossibility leads to the suggestion herein put forward that villas be exempt from paying accommodation tax and the concomitant yearly rental license fee.

However, if villa owners are exempted from the above referenced fiscal obligations they must still pay their fair share of our taxes. It is in this regard that I would suggest that all property owners who obtain their property via an Alien Land Holding License should pay a premium percentage on their annual property taxes-whether they rent their homes or not.

At this time, annual property taxes are a mere 0.075% of the assessed building value-a truly miniscule tariff. If Alien Land Owners had to pay, say, an additional 3% of their assessed building value plus a fixed fee of, say, an additional US$1000 per year (instead of having to pay accommodation tax and rental license fees) everyone would benefit. Villa owners would be spared cumbersome guest reporting requirements, villa visitors would be spared obtrusive questions, and Government would be assured of a steady cash flow within an existing monitoring framework.

Although villa owners who do not need an Alien Land Holding License to own their property (i.e. Belongers) would benefit from the proposed tax exemptions without having to shoulder the proposed increased property tax, that would simply help to level the playing field between Anguillian and expatriate villa owners, and would minimize the possibility of friction between the two groups from competition that is occasionally perceived as unfair.

However, in order to equitably offset this increased tax burden for expatriate villa owners, and in order to ensure their continued investment in this sector of our economy, I would propose that Alien Land Holding Licenses should not only mandate the above referenced increases, but they should also provide Permits of Permanent Residence for all foreigners approved to own land. With the foregoing in mind, would any expatriate villa owner object?

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