By NEIL HARTNELL
Tribune Business Editor
"Crazy" real property tax valuations and bills are threatening "to tear apart" Abaco's real estate market, multiple realtors warned yesterday.
They revealed that foreign real estate owners have started receiving real property tax bills that have "doubled" compared to previous years, leaving some with tax payments worth more than the value of their properties.
Suggesting there was "no rhyme or reason" for the sudden, substantial increases, Abaco-based realtors warned that the resulting outrage and uncertainty threatened to undermine their market and drive away the foreign second homeowners that are the foundation of the island's economy.
Besides threatening to reverse the 25 per cent year-over-year increase in business volumes they enjoyed in 2017, Abaco's realtors also warned the Government it would shrink its own tax base if foreign property owners abandon the Bahamas.
James Rees, a broker with Abaco Island Properties (Bahamas), told Tribune Business that the Department of Inland Revenue "seems to be completely out of control as to valuations of property owned by foreigners". He added: "The complaints have rolled in over the last few years, and now seem to be across the board. Several clients have already dumped their properties and will never return to the Bahamas. The tax increases have been outrageous and have been noticed by myself, many other realtors and, most of all, the property owners." Mr Rees cited numerous examples involving his clients to support his arguments, including the case of a 91 year-old American who has resided in the Bahamas for 50 years.
He revealed that his client owns 20 acres in the Little Harbour, of which the majority is "swamp land", but the Government had assessed it a value that was 22.6 times' higher than that calculated by a private appraiser.
"It's in the middle of nowhere, with no beach access, and 60-80 per cent of it is swamp land," Mr Rees told Tribune Business. "The Government assessed it at $1.4 million. He fought it, they said get it appraised, and an appraiser appraised it at $62,000.
Mr Rees said the Department of Inland Revenue had refused to accept the appraiser's valuation, and had instead hit his client with a real property tax bill of $91,000 - more than the property's appraisal value.
Despite seeking the assistance of local MPs to help resolve the matter, Mr Rees said the Government's tax authority had instead turned his client's file over to a private collections agency, Intelisys (Bahamas).
"He has this bill of $91,000 on a piece of property that is only worth $60,000 to $70,000," he added of his client. "He's not paying it. I've involved local MPs, and been to the local Treasury office I don't know how many times. They won't see me any more.
"They sent it to a collections agency. They've been rail roading this guy, sending him nasty letters saying that if you want to avoid this thing, pay immediately."
Mr Rees also cited the example of a canal lot at Casaurina Point, purchased for $111,000 prior to the 2008-2009 recession, but which was now worth $60,000.
He revealed that its foreign owners, who had spent three years attempting to sell at $60,000, were hit with a tax bill based on the Government's valuation of the lot at $203,000 - more than three times' its worth.
"They put it to $30,000 and dumped it," Mr Rees said of the owners' reaction. "They'll never come to the Bahamas again. They've dumped it." He also pointed to the Bahama Palm Shores development featuring 1,000 lots, where inland parcels had been appraised at $14,000-$15,000, but the Government had assessed their worth as $51,000 for property tax purposes.
"What we have going on here seems to be an unfair practice in one sense because no one is really doing an appraisal for the Government," the Abaco realtor added. "They're simply raising the tax across the board to absolutely ridiculous levels. From all of what I'm seeing and hearing, the taxes have almost exactly doubled.
"It's going to hurt all the Bahamas. They're running off the investor, and the only investor in the Out Islands that pays [real property] taxes are foreigners. In the long run they're [the Government] shrinking their tax base as people will be running away from it.
"It's out of control. It's catching all the foreign buyers. We've got a real issue here. If we don't watch out, we're going to end up with no real estate sales, a bad reputation and the construction industry is going to disappear," Mr Rees continued.
"Those are industries we need for the country to grow. You take all of this away and nothing will be left for the Bahamian people in order to make a living. The Government is talking about getting Bahamians to come back to the Bahamas; well, there's nothing for them to come back to. I know more wealthy Bahamians who have left Abaco for the US and Canada in the last few years than ever before. They've taken their families and got out."
Mr Rees shared with Tribune Business the reaction of a foreign client upon receiving a $60,000 real property tax bill for a lot valued at just $20,000. They said simply: "What is going on?"
"I'm quite upset over it," he added. "I thought they were isolated incidents, and all of a sudden I start receiving e-mails from clients as to what's going on with property values, why are they increasing so much, the market must be so good.
"I don't know what to do. I'm hoping someone, somewhere can make an effort to get someone to listen and reverse this crazy real property tax. Most of the Out Islands rely on the foreign investor. We don't have any source of income otherwise. We don't have the volume of people to survive here without the foreign investor. It's 100 per cent what runs Abaco."
Mr Rees was backed by Bill Albury, of Damianos Sotheby's International Realty, who told Tribune Business that the increased real property tax bills - which in some cases have more than doubled - were threatening to "tear apart" Abaco's real estate market and second home economy.
"It's going to be pretty dramatic as you may well imagine," he said of the impact, "because some of these foreign buyers have held property for many years and been assessed at a certain rate.
"In some instances the rates have doubled, and it's happened for no apparent reason. People are absolutely alarmed, objecting and requesting a review. In the meantime, their accounts are not being paid, so they're being turned over to collections agencies who are calling and threatening property owners, which is crazy."
Mr Albury said it was not only "unnerving" for clients but also the Abaco real estate community, as realtors are unable to properly advise clients on their likely real property tax bills or whether sales/appraisal values will be accepted by the Government.
"If they submit an up-to-date appraisal by a qualified appraisal it doesn't seem to make a bit of difference," he told Tribune Business. "They [the Government] just put a number on it. Someone in the Valuation Department is going absolutely nuts.
"It's quite unnerving in the real estate market. I do have a sale pending now, wondering how in God's name they're going to assess it. There's no rhyme or reason to it. It's going to tear the market apart if it's not resolved.
"It's gotten worse this year for sure. It's certainly gone to another level in recent times, and is affecting many more people. Before it was the odd case here and there, and once an appraisal was submitted it was corrected or at least addressed. Now, it doesn't seem to matter.
Mr Albury said it would be better if the Department of Inland Revenue issued guidelines with respect to real property tax assessments and billings, as realtors would then be better able to advise clients what to expect.
He echoed Mr Rees's warning about the Abaco economy's "total dependence" on the foreign second home market, and added: "Anybody who is not a Bahamian or has no standing here is probably going to say: 'To hell with it, and walk away'.
"We've experienced quite an uptick in the market here for the last year, probably a 25 per cent uptick overall, and we were hoping for a better year this year. But it's not going to happen at all when this starts to circulate and affects more people."
Bill Thompson, of Abaco Real Estate Agency, told Tribune Business: "I've had several clients in the last few days call me and say their property was reassessed for real property tax purposes at values much higher than what the property is worth.
"I'm not sure where they're [the Government] coming up with these figures, but the onus goes back on consumers to prove the real property tax department is in error. The only opening they have is to hire a licensed appraiser, who goes out and does an appraisal on the property that costs $1,000, and then go back and fight with the real property tax department as to what the value should be."
Mr Thompson revealed he was involved "in an ongoing case" where an American client, who had been paying real property tax on an assessed value of $8,000, had just signed a sales contract valuing the same lot at $18,000.
"What real property tax has told the Alexiou, Knowles & Co law firm is that they will take that $18,000, go back 10 years and assess tax on that $18,000," he disclosed. "They'll have to pay that [retroactive tax] out of the proceeds of the sale. It's ludicrous.
"It's making us, as members of the Bahamas Real Estate Association, to look as if we don't know what we're talking about. We're unable to advise our clients." Mr Thompson called on the Government to ensure it kept realtors "in the loop" on what it is doing.
Marlon Johnson, the Ministry of Finance's financial secretary, yesterday told Tribune Business he was unaware of any specific real property tax-related complaints from Abaco, although "we always get the odd situation".
Pledging to check the matter with his officials, Mr Johnson said the Government was determined to "enforce the laws as they are". He added that it was always able to review laws, and their impact, during the course of a normal Budget year.