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Lyford Cay Blasts 500% Hike In Tax

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is moving to reinstate the $50,000 property tax "cap" after The Bahamas' wealthiest community slammed "punitive taxation" that threatens "500 percent or greater" tax hikes.

KP Turnquest, deputy prime minister, yesterday told Tribune Business that the Government was "actively reviewing" recent Real Property Tax Act reforms that could have a "devastating effect" on Lyford Cay and its annual $215m economic impact.

While the Government is still determining the details, Mr Turnquest indicated it was seeking to distinguish between second home properties that are used exclusively by their owners and those that are rented out to other visitors.

He revealed that one approach under consideration is to reinstate the $50,000 "cap" for all properties but introduce a new "tourism tax" for those that are rented, with the Minnis administration aiming to agree "a final position" by Wednesday next week.

The deputy prime minister spoke out after the Lyford Cay Property Owners Association, in a July 30 letter sent to himself, warned that the "insensitive and irrational changes" to the Real Property Tax Act's "owner-occupied" definition were starting to undermine confidence among the very high-end North American investors this nation wants to attract.

Henry Cabot Lodge III, the Association's chairman, said tax rates that were "too high and unpredictable" would lead to consequences impacting "every sector of the economy that services Lyford Cay", as existing homeowners sought to exit and new buyers were deterred.

Should the Government not alter course, he warned that the "viability and sustainability" of Lyford Cay was at risk from reforms that both eliminate the $50,000 tax "cap" and double the tax rate faced by second homeowners that are not resident in The Bahamas for six months per year.

The Minnis administration has previously held firm to reforms that accompanied the 2018-2019 budget, but such a forceful and hard-hitting warning from the western New Providence community that is home to the Bahamas' wealthiest investors and homeowners appears to have proven impossible to ignore.

Signalling the Government's changed approach, Mr Turnquest told Tribune Business: "The matter is under active review at the moment. However, it is our intention to restore the real property tax cap for properties that are used as a second home residence. With respect to properties that are rented, we are considering the approach."

Probed further, the Deputy Prime Minister indicated that the Government's current thinking is to segment the market between properties that are used solely by their owners and those that are rented out to earn income.

With some second homeowners effectively using their properties for business purposes, Mr Turnquest said: "That latter point is the consideration. We may end up with a flat cap on all but a tourism tax on rentals.

"Again, that detail is being discussed now and we hope to have a final position by Wednesday next week." Asked whether this meant the Government was looking at reinstating the $50,000 "cap" for all properties, but placing an additional tax on rentals only, Mr Turnquest clarified: "That is my thought at the moment, but we will have to finalise on Tuesday and determine the mechanism."

Tracking these properties, and determining whether they are being used for rental purposes, will likely prove a tough task for the Government. Yet Mr Turnquest's confirmation that the Government is seeking to reverse course, and climb down from its earlier position, will likely be greeted with relief by Bahamian realtors and all sectors that relied on the second home market - especially on Family Islands such as Abaco and Exuma.

In truth, the Government has time to make the changes given that the Real Property Tax Act reforms were only due to take effect from January 1, 2019. Yet many observers will wonder why the Bahamas had to cause such angst among its target investor/homeowner market, and whether potential buyers will now be deterred by perceptions of an unpredictable tax policy.

Mr Cabot Lodge, in the letter seen by Tribune Business, wrote: "The 2018 amendments to the Act - real property tax rates and lack of clarification concerning the implications of the definition of 'owner occupied property' - has generated substantial dismay, confusion and much expression of concern within our community."

Acknowledging the Government's right to raise revenue from real property tax and other sources, he added that "many" Lyford Cay residents would now fall out of the 'owner occupied' category because they were winter residents in the Bahamas for less than six months annually.

Yet Mr Cabot Lodge said: "These owners retain their residences for their exclusive use as winter homes and employ their Bahamian staff and their Bahamian support service personnel on a year-round basis.

"If we understand this change in the law correctly, their real property tax rate is being doubled from 1 percent to 2 percent, and further they will no longer be eligible for the $50,000 annual cap on their real property tax.

"In many cases, this arbitrary change will result in a 500 percent or greater increase in their real property tax burden. For many residents in our community, this will impose annual real property tax bills of many hundreds of thousands of dollars."

One attorney, speaking on condition of anonymity, previously told Tribune Business that a $2 million vacation home would see its tax bill jump from around $18,000 to $33,000 - a $15,000 or 83.3 per cent increase.

But they suggested the impact was even more startling for a $10 million home, which currently pays $50,000 based on the real property tax 'cap'. With this removed, the attorney calculated that the tax bill will rise to around $193,000 - a $143,000 or 286 per cent increase.

Outlining the consequences of such steep tax hikes, Mr Cabot Lodge wrote: "If the tax burden becomes too high and unpredictable, a group of homeowners have already indicated to me that they will sell and leave the Bahamas.

"This would lead to unintentional circumstances that would adversely impact property values and every sector of the economy that services Lyford Cay as well as similar communities. It would heavily reduce household and general employment; construction; landscape maintenance services; pool services; electrical and plumbing services; food services; automobiles purchased; utilities payments; legal fees and real estate commissions; property tax revenue; and VAT revenue."

Mr Cabot Lodge continued: "Further negative impacts would include: The reduction of property values, the collection of revenues for community maintenance, and bring to a halt a number of construction projects that are presently being placed on hold because of this tax uncertainty.

"Such adverse impacts would not be unique to Lyford Cay, but they would also be felt throughout the many thriving second home communities throughout the Commonwealth. We do not understand the reasoning behind what appears to be the punitive treatment of expat winter residents whose properties are used in a manner identical with those of full-year expat and local residents.

"Whatever the reason, we are greatly concerned that if this interpretation of the law stands, we will have wholesale liquidation of what - in many cases - are multi-generational residents' properties here. The impact on our community will be devastating."

Pointing out that second homeowners provided "a consistently stable source of economic activity", Mr Cabot Lodge said: "In the case of Lyford Cay that has been over 60 years of consistent and solid community development and growth contributing approximately $215m per annum to the GDP of the Bahamian economy.

"We are concerned that absent our many 'winter' residents, the viability of and sustainability of our community is at risk. The rumours of these unwelcoming tax policies now swirling around New York, Florida, Toronto and other North American and Latin communities will have unintended long-term consequences for the Bahamas as investor confidence is undermined by insensitive and irrational changes in tax laws and policy.

"As I am sure your government fully understands, there is a large 'snowbird' population who own homes here, as in all Caribbean warmer climes, and this change in the law, we hope unintentionally, suggests that such residents, eagerly sought elsewhere, are now unwelcome in the Bahamas.

"We appeal to the Government to quickly clarify the intent of the Real Property Tax amendments, and to recognise that the winter resident market is an economic asset to the Bahamas that should be incentivised and not discouraged by punitive taxation."

Sir Franklyn Wilson, the Arawak Homes chairman, and who had himself previously warned of the amendments' consequences, yesterday suggested that the calibre of homeowners resident at Lyford Cay made the Association's letter impossible to ignore.

"I just do not see how it can be ignored; how any government can ignore it," he told Tribune Business. "Their position is similar to what the Bahamas Developers Association have said, and I'm convinced sound heads will cause that to be fixed. It's too important to the country."

Robert Myers, the Organisation for Responsible Governance's (ORG) principal, yesterday backed the Government's approach in distinguishing between second homes that are rented out and those used solely by their owners.

He explained that he saw "no reason" why second home renters should pay more in tax than "owner occupiers", given that they were effectively running a business. Mr Myers, though, emphasised that any taxation needed to be reasonable, so that the vacation rental business was not discouraged.

"I'm not saying we need to tax them exorbitantly and put massive rates on them," he told Tribune Business, "but they need to pay their fair share in tax.

"We have to be careful we don't put everybody in a one-size-fits all. There are people that don't live in the Bahamas that have very expensive homes and don't rent them out for commercial reasons. They're very private people and important members of our community from an economic standpoint. We don't want to discourage those people.

"But commercial people should want to contribute taxes to this country. They benefit from its success and should contribute to its operating costs."

Comments

DDK 1 month, 3 weeks ago

'Tis a good thing Government listens to the protestations of the wealthy, if not to those of its own electorate.

All second homeowners should be registered as such, including the detail as to whether their property will be rented out. If in the affirmative, they should then sign up to pay renters/tourist tax. If they fail to comply they should be fined as a first measure. Put your civil servants to work and deal with it Mr. Deputy PM. There are models out their to be followed.

After observing the changes to the bread basket list of items after much talk - the elimination of the word "sugar" and the amalgamation of the two former categories into one list instead of two, makes me fully understand that organizing second home owners to pay a hotel fee for their rentals may take a little more effort the Government is used to, but IT CAN BE DONE! THINK OF THE MONEY IT WILL BRING, LOOK AT IS AS MORE VAT!! That should be all the incentive ya need.

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OldFort2012 1 month, 3 weeks ago

It is more reasonable to expect that the Bahamas will put men on Mars next week than to expect civil servants to do a proper job. For a start, all this was completely untenable. Who was supposed to keep a register of who resides here for 6 months or not? Secondly, everyone would just have re-registered their homes in a company name. A company is permanently resident.

This is the kind of crap you get when you have civil servants dictate policy. Bunch of imbeciles, the lot of them. All they do is harm.

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DDK 1 month, 3 weeks ago

They are paid enough for doing little enough, it is past time they work for a living! Some do work conscientiously, but they are few and far between,

Which ever way it is done, some form of tax really should be collected on these units rented to tourists through-out the Bahamas. It was done before and has been done all these years by the hotel industry....

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OldFort2012 1 month, 3 weeks ago

I can't see what the problem is. Technology is here to solve the problem: online registration prior to embarkation, as in the USA. If your destination is not registered for tourism (hotel, registered guest house, etc...) slap an entry tax to be paid before aircraft embarkation. No pay, no fly.

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tetelestai 1 month, 3 weeks ago

A register is already kept (now are people reviewing said register...?) at the OPM, inclusive of proposed time domiciled in the Bahamas. You can re-register your home, but the beneficial owner on record is still required to be a "natural person". Changing from John Doe to XYC company does not shield you. I agree, sadly, with your first sentence.

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Well_mudda_take_sic 1 month, 3 weeks ago

Amused that you would think a company can both own and occupy a home. Ownership okay. But a company as an occupant of a home that it owns? Really?! To my knowledge the Act concerned has only ever spoken to the warm blooded individual kind of occupant ;-)

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OldFort2012 1 month, 3 weeks ago

Level of complication = ZERO. You get a tame Bahamian, bung him a grand and he is the occupier. Where is the problem?

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Well_mudda_take_sic 1 month, 3 weeks ago

What part of the term "owner-occupied" do you not understand? Are you planning on giving away your home to a Bahamian for the paltry sum of $1,000. You certainly would have no difficulty finding a Bahamian willing to take the title to your home for such a generous price so that you can legally avoid paying real property tax. Heck, I feel like giving you my phone number. LOL

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DDK 1 month, 3 weeks ago

A 10% Hotel Tax WAS a regulation for rentals by second home owners to tourists prior to VAT. The tax was paid into the local property tax office by the homeowners. It was not enforced by Tourism or the Treasury. 10% IS reasonable and should be collected. Mr. Turnquest and his staff can figure out the method with the VRBO and AIRBNB people.

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birdiestrachan 1 month, 3 weeks ago

who knows this group may be among those who make undisclosed donations to the FNM Government , so they listen to them. The poor and web shop owners have no say.

It does appear as if the FNM intention is to close down the Bahamas,

If they reverse these amounts their budget will have a deficit . Will they tax the poor more to make up the shortages.

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EasternGate 1 month, 3 weeks ago

There is a big misconception that wealthy people are generous. Oh no, the generosity is "conditional" on how much influence it brings. President Trump just gave a huge tax break to billionaires.....cause they greedy and never satisfied!

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TalRussell 1 month, 3 weeks ago

Don't wait no time during Imperial red shirts mandate ma comrades for KP be doin the Jerico march around the gated to "ungate" the gated.... there will be no brungin' down the gates by this bunch elected privileged RedUbpism elites. The reds have now merged political philosophies with the elite PLP's.... impossible tell the two parties differences cause if they let you in take Sunday drive around Lyford Cay - virtually impossible tell what is a castle's red moat from a PLP's moat.

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sealice 1 month, 3 weeks ago

Henry Cabot Lodge III, the Association's chairman

Isn't that Veronica's dad in the Archie Comic books?

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Well_mudda_take_sic 1 month, 3 weeks ago

With a name like that he can't help but be a real prude. LOL

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BONEFISH 1 month, 3 weeks ago

The Cabot Lodge are members of a prominent republican family in the US.

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Well_mudda_take_sic 1 month, 3 weeks ago

Yep, the biggest kind of prude.....from Nahant, Massachusetts.

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sealice 1 month, 3 weeks ago

Wowee they jump for the Rich White folk out west but a bloody hard working Bahamian needs something and you left on da hard ......

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Gotoutintime 1 month, 3 weeks ago

Sealice--You expected something different??

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Well_mudda_take_sic 1 month, 3 weeks ago

I would have thought the wealthy residents of Lyford Cay, Albany and Old Fort would be much more concerned about the dangers and environmental impact of the large scale LNG bunkering, refueling and transshipment facility that our government is proposing to allow Shell North America to put in very close proximity to their residential properties. Once this has been done, these wealthy homeowners will not have to worry about property tax at all because the value of their properties will quickly become essentially worthless.

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OldFort2012 1 month, 3 weeks ago

Who do you think is going to run Shell? Yes, white people. Where are they going to live? Yes, Lyford. Where are their children going to go to school? Lyford. Where are their wives going to play tennis? Yes, Lyford. So the very idea that they are going to shit on their own doorstep is ludicrous. Don't worry, the pollution here is going to be ZERO. Far less than what we have now with Clifton. It will be MUCH better.

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Well_mudda_take_sic 1 month, 3 weeks ago

Dream on my friend. You sound like someone who would be willing to live in the centre of a smelly public dump/waste site as long as it is owned and operated by white people. That's very telling about you. Perhaps you would be much happier living in another country composed in the main of people of your preferred colour. Give it some thought.

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concernedcitizen 1 month, 3 weeks ago

Since you want to bring colour into it ,,go take a stroll around Hope town ,Green turtle cay ,Spanish wells ,,then go stroll around George town Exuma and get back to me about which one is a dump

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ThisIsOurs 1 month, 3 weeks ago

"Turnquest, deputy prime minister, yesterday told Tribune Business that the Government was "actively reviewing" recent Real Property Tax Act reforms that could have a "devastating effect" on Lyford Cay and its annual $215m economic impact."

What a comedy show. By the end of the year I fully expect them to repeal all the adjustments made in the budget, food items, medicine, real estate, insurance, construction. This is unbelievable. Exactly what kind of impact analysis did Turnquest and Johnson complete? If Dr Minnis can't see that neither is qualified for their position, I'm not sure what to say. I understand Johnson's replacement isn't much better. There seems to be a big confusion over the qualifications and experience required to create effective monetary policy.

This budget plan is a disaster. And I'm not talking about whether or not the rich people should pay more taxes, I'm talking about Turnquest not running the numbers to see how things would change and who would be affected. I don't think they did any kind of analysis, it's just not possible for them to have and then crumble like this after someone points out the obvious.

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BONEFISH 1 month, 3 weeks ago

This year's budget was prepared by someone who does not understand economics or tax policy.That was said by someone in a tweet to a local talk show.PM Minnis should have kept Wilson as FS.He is an honest ,capable technocrat.An FNM businessman told me that.Also a chamber of commerce official said when the vat was introduced. Rolle and Wilson came and meet with us.They had a frank discussion with us.They took our suggestions in account with the vat and that is why we had a smooth transition when the vat was first implemented.

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ThisIsOurs 1 month, 3 weeks ago

I een know if I'll go out on a limb vouching for anyone's character from the last slush fund administration. Numbers don't lie. One billion gone. But I do have it on good authority that Wilson at least understood something about economics. Did he do the best job with his knowledge? Probably not

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BONEFISH 1 month, 3 weeks ago

Wilson's job I heard was with the revenue side.Mainly he dealt with the tax administration. I also heard he got the job because of merit. He got the position after John Rolle went to central bank. Nobody says nothing about John Rolle's performance .I was told why certain FNMs are trying to discredit and slander him.

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Well_mudda_take_sic 1 month, 3 weeks ago

Wilson should have been appointed Financial Secretary.

And Peter Turnquest should have never been appointed Minister of Finance - he's nothing but a myopic bean counter!

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ThisIsOurs 1 month, 2 weeks ago

I won't argue that Wilson understood economics, but the results were something else. I haven't forgotten what happened between 2012-2017. Asking for Wilson's return is like the children of Israel pining for "Merciful" Pharoah after they spent a couple days in the desert. I have reason to believe he was moved for cause beyond just politics. I also understand that he was not very nice to staff to put it very very mildly.

Here's my take on John Rolle, he's quite competent and I like him, from the outside he's not someone who pushes against the grain, (and that's from the outside because I don't know what happens in the meetings and you won't see a central bank governing openly opposing govt policy) politicians in this town like people like that, intelligent but they won't oppose you. It's a two edge sword, your competence gets mixed up with the things you "go along" with. Think Wendy Craig had the same issue

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BONEFISH 1 month, 2 weeks ago

Wilson only became FS in 2016.The previous FS the bulk of this last Christie administration was Rolle and Ehurd Cunningham for a bit.Most of these problems predate Wilson being made FS in 2016.

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ThisIsOurs 1 month, 2 weeks ago

Have you ever managed a volcano? It never cooperates, erupts at inconvenient times, doesn't go along with the plan and is only satisfied when it's in charge. You end up spending needless time defending against the volcano and its attempts to upset the entire operation because it wants to do what it wants to do

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BONEFISH 1 month, 2 weeks ago

A very simplistic view you have.Just like many politicians of the PLP and FNM

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ThisIsOurs 1 month, 2 weeks ago

Possibly. I'm no expert, I just have my experiences to fall back on. I once worked with an absolutely brilliant man. There was nothing he could not do as far as I was concerned. It turned out he had the "Power Bug" and was EXTREMELLY good at hiding it. When it came into the light, I was shocked to find that he'd been undermining everybody, reporting everybody to head office, sabotaging other people's work, deliberately not assisting where he could, giving misleading information. He wanted to be in charge. In the end his machinations destroyed a few careers and his own. Another thing I've learned is there are only so many types of people, you live long enough and youll see their patterns repeated over and over again

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BONEFISH 1 month, 2 weeks ago

You or somebody else has an axe to grind against this man.I am only saying what I have been told by persons.Maybe they were misleading me. But I was also told without a shadow of the doubt,that two former senior FNM cabinet ministers have defended this man.Also a former senior civil servant and a current one I highly respect.There is a saying there are three sides to a story,your side,my side and the truth.

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TheMadHatter 1 month, 3 weeks ago

"Yet many observers will wonder why the Bahamas had to cause such angst among its target investor/homeowner market, and..."

Simple. Govt does not consult with US here...the gurus of tribune242 dot com. As a result they have no "two heads are better than one" strategy.

The deputy cabinet secretary should have all of here in a Whatsapp group and we together hash out any new proposed plans prior to their being implemented.

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sheeprunner12 1 month, 3 weeks ago

Indeed .......... Its the Peoples' Time ............ such a joke. But KPT better be careful with tinkering with taxes .......... now that 80% of food is VAT-free, there is NO way that the Government can raise $1.5 billion from VAT each fiscal year.......... Bahamians spend big on food, gas and drinks........... and they expect the Government to take care of the rest.

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ThisIsOurs 1 month, 3 weeks ago

Lol. We must be the "shady" cabinet, cuz the shadow one taken.

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TheMadHatter 1 month, 3 weeks ago

Sheeprunner...so true. I reached out to so many trying to convince govt not to remove VAT from breadbasket items, but obviously the orders came down from our true rulers in Port au Prince.

Now we will go bankrupt and starve - unless you is like plenty plaintain.

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Alex_Charles 1 month, 3 weeks ago

This whole issue came about because these jackwagons decided out of the blue to abruptly increase taxes with no proper consultation and extraordinarily poor planning.

Bravo, just when ya thought we couldn’t be anymore incompetent.

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TheMadHatter 1 month, 3 weeks ago

The truly sad and ignorant thing is that LAST MONTH after the new VAT of 12% has started BUT the first payment to the Treasury haa not yet been made by retailers....these clowns have gone and made TWO loans from IDB $20M & $24M.

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DDK 1 month, 2 weeks ago

I think that should be labelled "CRMINAL".

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CaptainCoon 1 month, 3 weeks ago

country run by baboons as usual. Look at the reality, Lyford Cay residents pay more in property taxes than almost all Bahamians. ALL of the outstanding property taxes are owed BY BAHAMIANS who duck taxes.

This country went downhill right after the PLP won, now look at it. Run by Baboons! SAD!

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ThisIsOurs 1 month, 2 weeks ago

Our country is not run by monkeys captain "coon". Just because you're paying taxes does not mean you're paying your fair share. So that argument can be had. Taking someone's taxes up 500% though seems completely insane

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CaptainCoon 1 month, 2 weeks ago

It's fine to pay a fair share, we can bot agree that raising it by 500% is ridiculous. This is where proper planning and consultation is to take place, which clearly these baboons didn't do.

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TheMadHatter 1 month, 2 weeks ago

I believe Donald Trump simply overlooked us when he listed El Salvador and others in a disputed remark on Jan 11th, 2018.

If he issues an updated list, I'm sure we'll be on it - under the B's.

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jackbnimble 1 month, 2 weeks ago

I read the letter from the Lyford Cay Association in its entirety and I do agree that the move to take away the word ‘seasonal’ from the Real Property Tax Act was not well thought out. The removal of the word allows a foreigner to be taxed at the full rate even if he’s only in occupation of his home for less than 3 months in a year. We all know that most of these persons are indeed ‘snowbirds’ and only in occupation of their homies for about 3 months or less (usually during the winter season) in any year. How do you now proceed to imply that they are in occupation for 6 months and then tax them at the full rate for multimillion dollar homes, when the act defines the home as a ‘second home’ which clearly means that they are residing elsewhere and this is not their main home.

In its haste to tax everything and everyone into oblivion Turnquest and his team clearly did not think this through and with the singlet stroke of the pen were seeking to kill the ‘second home market’ which attracts the wealthy to our shores.

Glad to see somebody woke up and reversed this.

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TalRussell 1 month, 2 weeks ago

True that whilst Comrade Lyford Cay property owners does lives behind gates keep rift raft citizens out compound - why should they expect keep property Tax Man's on other side gates? Rather than KP offering Lyford Cay property owners a Property Tax Holiday - he should dispatch empty Armored Car through gates collect all cash owed taxes.

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