By NEIL HARTNELL
Tribune Business Editor
Realtors are warning that “absolutely crazy” real property tax valuations and billings are again threatening to undermine Abaco’s vital second home/property market.
Tribune Business has seen several examples in recently-issued 2019 billings where the Department of Inland Revenue has valued land up to four times higher than it is actually worth, or been sold for, with tax billings similarly exorbitant. Some have complained about a 500 percent tax hike in just three years
With many investors feeling that the Government failed to address a similar outcry last year, many professionals who rely on Abaco’s real estate industry for their living are urging the Minnis administration to again sit up and “take note” given the potential reputation damage to The Bahamas - and loss of business in a key sector - from sudden, unexplained tax hikes.
While the budget-imposed rise in the property tax rate on vacant land, from 1.5 to two percent, may partially explain the increased taxes, many realtors have told this newspaper that the valuations underpinning these billings are “totally out of whack” with market realities.
One investor, who last year sold a lot in Abaco’s Casuarina Point to a Bahamian for $50,000, and is still being billed by the Department of Inland Revenue for 2019 taxes, received a bill valuing the property at $203,762 - a more than four-fold increase on the purchase price.
“It seems that the Bahamas tax situation continues to get weirder and weirder,” the investor wrote to one Abaco-based realtor. “Yesterday in the mail we got a bill for our 2019 taxes on the Casaurina lot... which, of course, we no longer own. Not really all that odd, as I know that paperwork in Nassau takes forever to get filed and processed, but I thought I’d let you know about it.
“The really strange thing is that the 2019 bill is $4,035, up from $2,559 in 2018. There appears to be no arrears on the bill, so the new taxes went up another $1,500? OMG..foreigners are going to be fleeing! Did the tax rates go up as well and the assessments? Crazy!!!” Realtors told Tribune Business this lot was worth $60,000 at most.
Similar tales have already started trickling in as 2019 real property tax bills arrive in overseas mail boxes. Another investor, complaining of a 500 percent hike in their tax bill over the past three years, wrote: “I am checking to see if there has been any interest in the sale of our property. We are very concerned about the taxes that we are incurring.”
“For many years, the taxes on the property have ranged between $400 and $500 a year, which was very reasonable. Last year, we received a tax bill for $1,838, more than a 300 percent increase. I filed an objections form with the department of taxation, and despite numerous inquiries, never heard back from them.
“Today we received a tax bill for a total of $4,248, which includes the $1,838 arrears from last year, and an additional increase for this year to $2,408. That is about a 500 percent increase from what we paid just three years ago. I understand that you are not a lawyer, but we are really not sure what to do. Should we hire a lawyer, or have the property resurveyed? We are not sure what is happening, but do not have the resources to continue to pay this tax rate.”
Yet another investor, who said his two lots in Abaco’s Palm Shores had traditionally been valued at $12,000, revealed that he was suddenly hit with a $92,832 valuation and $1,387 tax bill for 2018.
“I did send, to the Commonwealth of the Bahamas, a Notice of Objection on February 28, 2018, proposing that the total property valuation for my two lots be decreased from $92,932 down to $30,000, and sent to the Bahamas Department of Inland Revenue a cheque for what I had been paying to them for years: $175,” they added.
“I heard nothing back from them until I received the 2019 real property tax today: A notice of assessment and demand note for the year 2019. On the same valuation as last year, $92,832 for my two lots, the current tax amount for 2019 has gone up to a whopping $1,816.64; as I stated, an over a 10-fold increase from 2017!”
The realtor who received the complaint suggested the two lots were worth between $12,000-$14,000 “at most”, and replied: “I sincerely apologise on the behalf of the Bahamian people. The Government tax office is out of control with price valuations, and I am sure this will backfire in short order.”
Abaco-based attorneys and realtors backed this assessment when contacted by Tribune Business. James Rees, broker/owner of Abaco Island Properties, confirmed to Tribune Business that he had received four such complaints thus far - and real property tax bills had only just been issued.
He added that the Department of Inland Revenue had failed to correct the problems identified last year, when numerous investors filed valuation/billing objections and provided independent assessments of their property’s worth, only for the promised corrections to never materialise.
“We’re going to see push back. There’s no doubt,” Mr Rees told Tribune Business. “The people that went ahead last year and paid, they were promised changes but nothing happened. They’re stuck. They’ve asked for a revaluation and decrease, and that’s not been given.
“I imagine that in a month it’s going to be blown up a lot more than it is now. The end of November is when I got my first complaint. They’ve not had a chance to properly react, but I’m sure it’s going to come and start spreading bad news for The Bahamas, with people complaining they’re being ripped off.
“I think the reputation thing is going to hurt us, and people overseas are not going to come in to buy a property worth $20,000, $30,000, $40,000 if they’re going to be faced with these bills. I don’t know what the answer is.”
Neil Aberle, an Abaco-based realtor with H. G. Christie, told Tribune Business he had one client who had bought a lot in Dolphin Beach Estates for $150,000 at the height of the pre-2008 real estate boom who was now unable to sell it for $75,000. Yet the Department of Inland Revenue had valued the property at $230,000-$250,000.
While such cases were “not across the board”, he added that there were “numerous instances” sufficient to cause harm to Abaco’s real estate market and second home industry, and The Bahamas in general.
“Who comes up with these numbers they’re sending out?” Mr Aberle asked of the property tax valuations. “I have no idea. There doesn’t seem to be any sufficient basis in fact... It makes no sense, they’re so out of touch with reality.
“It’s going to be very detrimental to the real estate market in The Bahamas on whatever island it happens. If property tax is out of line with market value, if it’s going in the wrong direction, there’s no justification for those values and word is going to get out pretty damn quick about property taxes.
“It totally undermines investor when it’s so unpredictable. Investors in anything hate volatility and uncertainty. They have no control over it.”
Christopher Roberts, another Abaco realtor, said that clients who had paid their 2018 real property taxes on the basis of government assurances that the valuations would be resolved had instead been hit with the arrears in their 2019 bills.
“The valuations they have on the land appear to be way out of whack on a lot of stuff,” he told Tribune Business. “It’s a mess; a total mess. Some people do sit on land for ever and ever, but there are people who bought and built a retirement home, to get these crazy tax increases and no response?
“It’s like going to a restaurant and having a bad meal. You tell all your friends. You tell them: Don’t buy property in The Bahamas because you don’t know what is going to happen.”
Marlon Johnson, the Ministry of Finance’s financial secretary, told Tribune Business he was unaware of any real property tax billing complaints relating to Abaco and said there was “nothing yet to suggest systemic risk because of valuation concerns”.
He urged property owners with concerns over their tax bills and property valuations to report them to the Department of Inland Revenue, adding that action would be taken if their was “merit” to the complaint.