TOURISM Minister Dionisio D’Aguilar was right on two counts when he spoke out at the end of last week about the government’s decision to backtrack on a real property tax definition that had the luxury market in full-blown panic mode.
He was right when he said the government did not reverse its position because it buckled under the pressure of threats from Lyford Cay following The Tribune’s publication of part of a letter sent by the exclusive community’s homeowners association to the Prime Minister expressing fear of a massive sell-out and departure as a result of pending property tax hikes.
The Lyford Cay warning and the government’s change of position came about 48 hours apart so it would have been easy to understand how they were seen as linked. But it also would have been wrong. The decision to reverse what turned out to be an unmitigated debacle came more than two weeks before the letter landed on the desk of the Prime Minister.
The Deputy Prime Minister and Minister of Finance Peter Turnquest and those close to him had quietly reassured investors, developers and others that the mistake – a blanket unintended hike by tying a residency requirement to property tax rates - would be rectified and the language would revert to that which applied prior to the new budget.
A few people were informed about the reversal but no announcement had yet been made. And because Mr. Turnquest announced the reversal so soon after The Tribune broke the story about the letter, the connection in the public’s mind was indisputable.
The days that followed must have made the normally composed Mr Turnquest bristle. Airwaves were crammed with bitterness about how the rich get heard and the poor get left. In the absence of information, enmity flourished. The debacle became about rich and poor instead of a poor decision that would have impacted the rich as well as large segments of the economy including real estate and hundreds of small and medium size businesses that serve communities like Lyford Cay, Baker’s Bay, Old Fort Bay and Ocean Club Estates.
There is no question the real property tax hike and the way it was done was a mistake that should never have happened. Driven by a desire to find a way to tax those who use ultra-luxury properties for ultra-high priced short term rentals like an Airbnbs for the super wealthy, government attempted to tie property tax to a residency requirement.
By tying the requirement to be in residence for six months of the year to qualify for a cap of $50,000 annually in property tax, it opened those second and third home owners who may spend as little as six weeks here to a tax bill of two percent of the assessed value of the property over the first $500,000. For the owner of a $10m home, the tax bill would have gone from $50,000 to nearly $200,000 a year, for the owner of a private island worth even more – and many are – the annual tax bill could have been a half million dollars.
Many owners do rent their homes or island estates short-term for vacation or corporate purposes and expats who do that should pay a commercial rate or a fair business licence fee. Instead of thinking it through and finding a way to derive revenue from those who use their properties to earn income, authors of the budget threw everyone into one large corral and lassoed them with the same rope, nearly strangling a market that contributes far more than it demands in services.
Concerns expressed by Lyford Cay residents were similar to those expressed repeatedly by the 700 members of BREA and by developers, architects, builders, contractors and others who would have been affected by the sudden blow to a luxury market and those concerns were heard loud and clear by officials, as we said, long before the Lyford letter landed on the PM’s desk.
The second count on which the Tourism Minister was right was having the courage to talk about it. Up until Mr D’Aguilar spoke out, Mr Turnquest was hung out on a limb on a very shaky tree. The Prime Minister was silent. Not one person in a leadership position came to Mr Turnquest’s defence. Everyone distanced themselves as if he alone had created the blunderbuss of a budget.
The Minister of Finance did not make the decision single-handedly but when the tax change turned into the tax fiasco he found himself a very lonely man. So we applaud Mr D’Aguilar for standing up for Mr. Turnquest and saying the government made a bad decision, recognised it, will make the proper amendments when the House reconvenes in September and it did not buckle under pressure from Lyford Cay.
The government did make a mistake, an unintentional one with unforeseen consequences. But like with all mistakes, the faster you own them, correct them, apologise and learn from them, the faster the public forgives and the faster you get on with the work that lies ahead.