The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A key Ministry of Finance adviser yesterday said he had asked government officials to probe whether there was “any merit” in complaints that the first-time buyer Stamp Duty exemption was being misinterpreted, agreeing that the situation might need to be clarified.

And James Smith was also in agreement with his minister of state for finance successor, Zhivargo Laing, both men telling Tribune Business it was “never the intent” of either the PLP or FNM governments to combine the conveyancing and mortgage prices to create an aggregate transaction value.

This is the main complaint that has been made to this newspaper, namely that by aggregating the conveyancing and mortgage values, the Treasury was valuing many real estate transactions at above the $500,000 first-time buyer exemption threshold. As a result, their applications were being turned down.

Pointing out that he was waiting for government officials to return with the investigation results, Mr Smith confirmed: “I’ve asked someone to look into the complaints and see if there’s any merit. I’ve asked, but not been answered.”

Agreeing that the Government may need to clarify the exemption, which is enshrined in law via the Stamp Act, Mr Smith told Tribune Business: “One should be consistent in interpretation. It shouldn’t be one way or the other.

“What will probably need to happen is that the Government needs to look at it and clear it up, so we’re all on the same page. We should get clarity.”

Explaining the intent behind the first-time buyer exemption, which was introduced by the first Christie administration for properties valued at $250,000 or less, Mr Smith said it was an economic stimulus designed to assist middle and lower income Bahamians, not a revenue raising measure.

“The intent was to provide an additional incentive to the real estate and housing industry to stimulate construction activity,” he explained. “It was not intended to be a revenue measure; just the reverse. It was meant to be an incentive to the housing sector.”

The Ingraham administration extended the first-time buyer Stamp Duty exemption and widened its scope, increasing the value to properties valued up to $500,000, and also including vacant land in the deals that could attract the incentive.

Mr Smith, though, indicated that he disagreed with the latter reform, telling Tribune Business: “It should have been a development incentive. Unless the intent was to build immediately, we should not be lending a stimulus to hoarding or speculative investments.”

He agreed, though, that the intention was not to enable vendors to avoid their portion of the Stamp Duty, Tribune Business has been told that transactions involving first-time buyers are increasingly being structured so that the purchaser pays 100 per cent of the Stamp Duty, not 50 per cent as is the norm.

This is being designed so that the seller avoids Stamp Duty, but Mr Smith added: “I don’t think that was the intention. It says the first-time buyer, not the first-time seller.”

His successor as minister of state for finance, Zhivargo Laing, told Tribune Business that several instances where first-time buyers were denied the exemption, after the Treasury added the mortgage and conveyancing values together to determine an aggregate, had occurred under the Ingraham administration.

These decisions, though, had been reversed, and Mr Laing said the important issue was how the exemption was being interpreted by the Christie government.

“The intention was never, if you had a $200,000 purchase and a $200,000 mortgage, that the two of those were combined,” Mr Laing said.

“It was one transaction. The transaction is a $200,000 purchase of a house, and it’s within the $500,000 limit.”

Agreeing that the Government needed to clarify the situation for the benefit of all concerned, Mr Laing recalled how the Ingraham administration went into action when the Treasury started using previous conveyancing documents to argue that real estate transactions should attract greater Stamp Duty liabilities than their current prices.

“We did the necessary to say to the Treasury this is the way the matter is to be handled,” Mr Laing added.

And, referring to the first-time buyer exemption, he said: “This is an issue that any government has to do the necessary to clarify. It’s not what happened in the past, but what the situation is today.

“Persons that have concerns about this should be asking the Government what should be the case.”