The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent Abaco attorney has called for a property tax formula that is “fair and reasonable”, warning that “the potential is still there” for the latest hikes to scare off foreign investors.

Frederik Gottlieb told Tribune Business that while “anxiety” over enormous increases in real property tax billings does not currently exist “to the same extent” it did with last year’s valuations, he had seen documents showing the same problems were emerging once again.

Urging that real property tax valuations be done “on a consistent basis” to prevent foreign Abaco real estate owners from being taken by surprise by massive tax increases, the former Bahamasair chairman said too many assessments appeared to be “capricious and arbitrary”.

Mr Gottlieb said a settled calculation method was also badly needed, given that the basis for property valuations - and tax assessments - often seemed to frequently interchange between market value and what a buyer had paid for a property.

He added that this made it difficult for himself and other attorneys “to advise clients with the degree of certainty that they are entitled to” when it came to real estate and associated taxes, and warned that the situation still threatens Abaco’s and The Bahamas’ reputations as a safe, secure haven for property assessments.

Mr Gottlieb spoke out as multiple Abaco realtors warned that “absolutely crazy” real property tax valuations and billings were once again threatening to undermine Abaco’s vital second home market and real estate in general moving into 2019.

Tribune Business has seen several examples where foreign property owners complained of tax hikes amounting to 500 percent in just three years, with Department of Inland Revenue billings valuing land up to four times’ higher than it was recently sold for or compared to market valuations.

“I wouldn’t say it was to the same extent it was before, but certainly I have some correspondence that’s come across my desk that indicates some of the same thing is happening again,” Mr Gottlieb told Tribune Business, “and it is causing a degree of distress and anxiety among foreign property owners.

“Potentially it could have a very negative effect, but I haven’t seen that much transpire in terms of foreign investors being scared off due to the tax increases.” He added that this was because “the worst seemed to have been addressed, albeit not totally satisfactorily”, when the Government told persons to pay the same amount as prior years and apply for reevaluations following the outcry over 2018 real property tax billings.

However, Mr Gottlieb warned: “The potential is still there, and the correspondence I’ve seen from the individuals affected is negative. It’s a question of how much is promulgated by them outside the country.”

He added that many of the challenges threatening Abaco’s real estate market, especially the second home industry that is vital to its economy, could be resolved if “a better system is put in place for valuations on a consistent basis that are fair and reasonable, and do not come as a sudden surprise to foreign property owners”.

“It’s not a satisfactory situation,” Mr Gottlieb said. “It appears to be very capricious and arbitrary how this is carried out. It does not happen for long intervals and then there’s a heavy increase and no nexus to the true market value of the property.

“It does cause a lot of disquiet and apprehension. There has been some negative fall-out, not recently, but the potential is there and the Government should take note.”

He added: “The Government is trying to address some of the problems that exist in the Department of Inland Revenue in trying to come up with some acceptable way of determining what tax is owed on a more regular basis, and one that is fair and reasonable.

“The big problem is that the particulars keep changing with regard to real property tax. One day it’s based on purchase price, the next day it’s considered to be the market value of the property.

“One never knows what you’re up against, and it’s very difficult for colleagues - myself included - to advise clients with the degree of certainty that they are entitled to. I think the Government is trying to address the situation.”

Marlon Johnson, the Ministry of Finance’s financial secretary, told Tribune Business that the Government is planning to “tighten up” real property tax legislation and employ “modern real estate technology to assist with mapping and valuations.

While the Ministry of Finance was unaware of any “widespread concerns” over 2019 valuations from Abaco or any other island, the top official called on those believing they are being over-taxed to come forward.

“There will be people who take issue with their valuations, and we certainly want them to make themselves known to the Abaco office or office of the Department of Inland Revenue in New Providence,” Mr Johnson said. “We’ll happily take a look at them if there’s any merit to their particular complaint.

“There’s a valuation methodology in place. If persons feel the valuation is not accurate, they can come in, have a discussion with us, and we will go and do another look. In cases like that, tell folks to let us know. We want to make sure valuations are accurate.

“We are looking at legislation to tighten that up where possible. We will be making the investment in software and processes around land evaluations in coming years.”

Confronted by Tribune Business with the complaints from Abaco about discrepancies between property tax billings and valuations, which were detailed in Tribune Business on Monday, Mr Johnson replied: “I don’t see any evidence of that yet.’

“We’ve not had widespread concerns about that. We do have individuals who have issues from time to time, and they will be dealt with on a case-by-case basis. We have seen nothing yet to suggest systemic risk because of valuation concerns.”

Mr Johnson said the Real Property Tax Act imposed a legal obligation on real estate owners to notify the Department of Inland Revenue about any improvements made to their property, but conceded that the law stipulated the period when valuations should take place.

“We will be taking steps to comply with that, and feel we can utilise technology and modern real estate technology to make the exercise more timely with respect to real property tax valuations,” he told Tribune Business.