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Foreigners owe $156.6m in unpaid property tax

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Foreigners owning vacant land in the Bahamas owe the Government more than $156.623 million in unpaid real property taxes, with a report recommending the greatest of these debtors be the “logical” first enforcement targets.

The document, never previously revealed to the Bahamian people, discloses the extent to which just over 5,800 non-compliant taxpayers owe the bulk - some 75 per cent - of the $633.416 million in unpaid real property taxes that were sitting on the Ministry of Finance’s books in 2010.

The ‘Conditions for improving real property tax in the Bahamas’ report, authored by three experts in the field, recommended in particular that the Government target ‘vacant land’ owners who owe substantial sums to the Public Treasury.

Although Tax Department data showed there were some 22,000 ‘vacant land’ debtors in 2010, the report found that just 38 of these all owed sums worth $500,000 or more. And another 237 owed more than $100,000 each.

“Under the 2009 Amendment of the Real Property Tax Act, the Government was given the explicit right to seize and sell unimproved property for non-compliance,” the report’s authors wrote. “To maintain credibility, it will be important for the Government to take some symbolic action to enforce non-compliance against unimproved property.

“According to the arrears information from the Tax Department, there are 22,000 vacant land taxpayers who are in arrears for a total of $156 million, with average arrears of $7,000.

“A further analysis of the vacant land arrears shows that there are 38 vacant land taxpayers who owe more than $500,000 each. There are 237 vacant land taxpayers who owe more than $100,000 each. These are the logical taxpayers to target for the enforcement sequence.....

“International experience suggests that taking action on only a few cases will confirm the Government’s commitment to enforcement, establishing the political credibility and the impact on improving voluntary compliance.”

Although the report does not explicitly say so, Bahamian owners of so-called vacant land in New Providence, as well as the Family Islands, are exempt from paying real property tax, so the 22,000 ‘non-payers’ must logically all be foreign individuals or companies.

The report, produced by Dr Roy Kelly, Dr Graham Glenday and Wayne Forde, was completed in mid-2011, but has never been formally released or made widely-known to the public until now.

Its contents remain highly relevant today, not least because little has changed, while the Government appears to be following some of its recommendations, such as the creation of an Inland Revenue Department, to ‘the t’.

And Michael Halkitis, minister of state for finance, has repeatedly talked of increasing real property tax revenues to a sum equivalent to 2 per cent of Bahamian gross domestic product (GDP).

This would almost double existing real property tax collections, and is the same objective set out in the report authored by Messrs Kelly, Glenday and Forde.

The Bahamas was estimated to have $633 million in outstanding real property tax arrears in 2010, a sum that the report said was “more than seven times’ the annual property tax liabilities”.

It agreed that this sum would have to be verified by checking individual files and confirming the sums owed, an exercise Mr Halkitis has said the Government is now engaged in.

He has hinted that the true sum outstanding may well be lower than Ministry of Finance and Auditor-General estimates, and the report also agreed that some debts may be uncollectable and have to be written off.

“Others, however, may be collectable and could bring in considerable amount of tax revenue on a one time basis with an appropriate collection/enforcement strategy,” Messrs Kelly, Glenday and Forde wrote in the report.

“There are 47,596 outstanding taxpayers who owe a total of over $633 million. The majority of outstanding arrears are owed by the commercial properties (61 per cent), followed by vacant land (25 per cent) and owner-occupied properties (15 per cent).

“On average, the commercial taxpayer owes $23,000, while the owner-occupied taxpayer owes $10,490 and the vacant land taxpayer owes $7,096.”

While ‘vacant land’ delinquents were most in number, at 22,073 or 46 per cent of the total, they are the lowest-yielding targets for government enforcement.

Some owner-occupiers (residential homes) were delinquent as of 2010, owing a collective $93.52 million or 15 per cent of the balance.

The greatest debtors, though, are commercial properties, with some 16,608 ‘delinquents’ owing a collective $383.272 million in 2010 - a sum equivalent to 61 per cent of the total real property taxes outstanding.

The report by Messrs Kelly, Glenday and Forde indicated that the Government could achieve the greatest results by concentrating its enforcement efforts and resources on those real property taxpayers owing the largest sums.

“The property tax arrears are heavily concentrated in only a few taxpayers,” the report said. “Only 168 taxpayers (0.6 per cent of total taxpayers in arrears) owe 25 per cent of the arrears, for an average of $943,040 each. Ten per cent of the taxpayers owe more than 75 per cent of the outstanding arrears amounts.”

Based on Tribune Business calculations using the report’s data, just over 5,800 delinquent taxpayers owe over $475 million in unpaid real property taxes to the Government.

“To encourage greater compliance, there is need to design and implement a tax arrears collection strategy to improve revenues, equity and efficiency in the short-term, mobilise the policy will for enforcement, and send a signal to taxpayers to improve voluntary compliance in the future,” the report concluded.

“The Government should undertake a comprehensive collection and enforcement approach structured around a combination of payment and collection incentives, sanctions and penalties, combined with the necessary political will to ensure follow up action be taken against noncompliance to the full measure of the law.”

Messrs Kelly, Glenday and Forde pegged real property tax compliance rates in the Bahamas at between 30-50 per cent, suggesting it fell in the middle of this range, and that the Government again fails to collect the bulk of taxes due to it.

“The Business License and Property Valuation Unit indicates that the property tax roll has about 120,000 properties listed, from which 37,000 tax bills are issued annually. Of these 37,000 tax bills issued, the unit receives payments from about 15,000 taxpayers (40 per cent),” the report said.

“The 15,000 taxpayers who paid their property taxes in 2009 paid about $87 million. Half of this $87 million came from 4,775 commercial properties, which paid an average of $9,362 per property.

“The owner-occupied residential and the vacant land each contributed about $21 million each. Over half of the paying taxpayers (8,177) paid property tax on vacant land, each paying about $2,500. There were only 2,336 owner-occupied housing taxpayers, who paid an average $9,107.”

Comments

B_I_D___ 7 years, 10 months ago

Now...how much of the remaining balance is foreign owned homes or developed land? Willing to bet it's another healthy chunk!

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Mayaguana34 7 years, 10 months ago

All of these properties combined does not equal half of what is being held by the Grand Bahama Port Authority in a City we call Freeport. Apply the law equally in The Bahamas and let the expats pay on developed as well as undeveloped (Accepting Freeport is not a family island) and insist that ALL Bahamians pay on developed lands under the current thresholds. Just cut the deficit by 30%

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duppyVAT 7 years, 10 months ago

Who do you blame for undeveloped foreign-owned properties???????? And who do you blame for undeveloped generation land???????? And who do you blame for undeveloped Crown Land??????? And who do you blame for undeveloped commonage land?????????

THE GOVERNMENT OF THE BAHAMAS!!!!!!!!!!!!!!!!!!!!!

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Romrok 7 years, 10 months ago

Collect the tax, thats good. BUT, I know if 18 large bits of land for sale in my area now, all foreign owned. They all selling cause the government keeps hiking the rates. Cant sell because bahamians cant afford and foreign folk arent gonna pay the tax rates. When will these fool governments realize that these folk are running from the states and such to get away from high taxes. If we are charging too much tax, they go elsewhere, like American manufacturing. Might aswell be cheap enough that they come here and spend some money.

Stop listening to these poly (many) tic(fat blood sucking parasites) ans. We need foreigners, we need investment in something other than tourism. We also do not need to squeeze every last penny out of these foreigners, they do expect to make money on their investment, thats why they invest. If you dont allow them make their money, again, they will go somewhere where they will make what they expect, so give them a reason to be here rather than elsewhere.

No one except for cronies seem to get anything back for their taxes, ie kickbacks. Terrrible police, horrible slow customs, staff cutting they eye at you in government offices, horrible roads that should be edged for long life, slackness in cleaning our airports and, well, Bahamas Air. D average schooling, everyone that should be locked up out on bail, ports falling apart (Abaco), BEC. Tell me what we get back for all the money we put in? Expect for the chosen that get jobs and life pension on the backs of the people? How about letting more manufacturing via foreigners in to put more to work? Then use the private sector to sort out the excess of civil servants?

Stop using my taxes to slow the unemployment rate. Bahamians, stop selling yourselves for a ham or turkey at Christmas.

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Economist 7 years, 10 months ago

Magaguana34, you clearly do not understand that residents in the Port Area PAY Service Charges, they get no exemption if they live there, as does everyone else, so they are in effect paying more tax than those in New Providence.

In addition each household pays just over $26 per month for their garbage to be collected, it is free in Nassau and elsewhere.

The introduction of Real property tax will INCREASE the DEFICIT because the government will then have to pay for the up keep of the roads, airport and harbor as well. Right now the Port Area pays for itself and gives the government a net profit.

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duppyVAT 7 years, 10 months ago

The government of The Bahamas will NEVER make all Bahamians pay property tax ....... Hell yall een remember Ishmael Lightbourn????????? ......... can you imagine another 40,000 of them to make stress for our politicians????????????

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Economist 7 years, 10 months ago

You are correct the government wont, but the WTO and IMF will.

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The_Oracle 7 years, 10 months ago

Correct Economist, any Bahamian left who doubts how dire our situation is, or believes our dumb assed Politicians can decide anything on their own, Is living in a fools paradise. All it will take is one or two EU-EPA member country citizen to file a complaint on the grounds of unfair treatment with regards to taxation. Under WTO rule, tax all or tax none. How can you be a "most favored nation" if it costs you more?

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Economist 7 years, 10 months ago

Yup, we didn't want VAT but we have it. It was forced on us by the International community.

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duppyVAT 7 years, 10 months ago

Yep ................ and next will be universal healthcare, universal education tax, universal property tax and then finally universal income tax .... by 2025.

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Economist 7 years, 10 months ago

Now if they would force the Freedom of Information Act and the Fiscal Responsibility Act , that would be helpful

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The_Oracle 7 years, 10 months ago

The IMF and WTO will only care about a freedom of information act when they figure out how we have figured out how to slide things past them irrespective of their directives! Business as usual by the usual suspects!

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asiseeit 7 years, 10 months ago

I look forward to the day when the IMF and the WTO take over, they can't be worse than what we have had so far!

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