By NEIL HARTNELL
Tribune Business Editor
The Bahamas Real Estate Association’s (BREA) president yesterday questioned why the Government would even contemplate replacing Stamp Duty on property transactions with Value-Added Tax (VAT), adding that she had shown why there was no need to impose the latter on the industry.
Carla Sweeting told Tribune Business that shortly after taking office she had prepared a paper, shown to both the Government and Coalition for Responsible Taxation, that identified untapped real estate revenue sources and would have “eliminated VAT for us”.
And she queried why the Government, as it has revealed in recent meetings, would consider replacing Stamp Duty with VAT when the former was one of the few taxes it was “guaranteed” to get.
“We produce more taxes for the Treasury than any other sector to my mind,” Ms Sweeting told Tribune Business. “If you can come up with another sector that pays more, and where the Government does not have to chase after it, let me know.
“You can’t get the keys to the home from your attorney unless you have paid the tax. It’s [Stamp Duty] one of the few taxes that the Government is guaranteed to get, as it is paid at the time of closing. You want to eliminate the Stamp Duty in favour of VAT?”
The Government, in meetings with BREA members over VAT, disclosed that it was assessing whether the tax could ultimately replace Stamp Duty on property transactions. However, this appears, at best, a long-term prospect.
The VAT Act and regulations impose the 7.5 per cent levy on brokers’ commissions and attorney fees for residential real estate transactions, and do likewise for commercial property sales. However, in the case of the latter only, VAT will also be levied on the sales price.
The Government’s position is that businesses will be able to recover the VAT paid on real estate transaction prices as part of their normal ‘input’ costs.
Yet Ms Sweeting said this is not as simple as the Government, and John Rolle, the Ministry of Finance’s financial secretary, are making it appear.
“He called it an ‘in and out’ transaction, but at the end of the day, the buyer still has to come up with the money,” the BREA president said. “Ultimately, whoever’s paying the fees is responsible for the VAT.”
Ms Sweeting said the Association was forging ahead with educating its members, and preparing them for VAT, despite the difficulties caused by the frequent changes to the Guidelines.
And numerous issues remained unresolved, including how transactions involving two brokers - one a VAT registrant, the other not - would be treated.
Ms Sweeting said the VAT could only be paid on half the commission, the portion covered by the realtor with an annual turnover greater than $100,000.
She said such a situation was “a little tricky”, and added: “Once again, the buyer will have to eat that [VAT] if the seller is saying their agent does not pay VAT.”
The BREA president said realtors who were not VAT registrants would also gain a competitive advantage when it came to attracting listings, as their costs were lower.
And she also questioned how the Government would ‘police’ those individual realtors and brokers whose businesses eventually took them beyond the $100,000 annual turnover threshold where they became mandatory VAT registrants.
“I feel there’s going to be a lot of misunderstanding and a lot of confusion,” Ms Sweeting said.
She added of Mr Rolle’s response to BREA’s request for changes and amendments: “He’s basically told us that it’s too late, and the Government can’t change anything. They’ve told us it is what it is.”
With real estate such a key indicator of whether the Bahamian economy is growing or failing, Ms Sweeting said she hoped the Government would change course once it realised VAT’s impact on the sector come 2015.
“The Government doesn’t seem to get it. Only the Central Bank does,” Ms Sweeting told Tribune Business. “We don’t understand what else we need to do.
“We’ve got to keep pressing on, and when the first quarter of next year comes and they see how much we’re doing, maybe they’ll say we need to amend the rules for the real estate industry.
“Don’t stop the volume of sales, because that is going to generate money for you.”