The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government can "get an immediate cash injection" worth potentially hundreds of millions by implementing a series of discounts for bulk real property tax payments, a prominent realtor said yesterday.

Mario Carey, the Better Homes and Gardens Real Estate MCR Group Bahamas principal, told Tribune Business none of the high net worth property owners he had floated his proposal to objected to paying 10 years' worth of real property tax up-front if they received a 20 percent discount on this sum.

For someone paying the $60,000 annual real property tax maximum, Mr Carey said this would provide a $120,000 saving on $600,000 worth of collective ten-year payments. The advantage to the cash-strapped Government, he added, is that it will receive an instant bulk cash payment that could prove potentially vital given the significant blow inflicted by COVID-19.

The discounts could be graded according to how many years' worth of payments a property owner wishes to make, with Mr Carey suggesting it could be set at either 10 percent or 15 percent for five years' worth of tax.

He added that such an initiative should be open to both Bahamian and foreign property owners regardless of the sums involved, extending from the very wealthy to those whose annual payments were $1,000 or less.

The Better Homes and Gardens chief, calling for the benefits of his proposed incentive to be "locked in" to guard against future changes in real property tax rates and legislation, said a further advantage was that it gave investors tax certainty and reassurance that they will not be "targeted to bail-out" the Public Treasury post-COVID-19.

Many Bahamians, though, believe that those with greater means - especially high net worth foreign investors - should pay more through a progressive tax system linked to ability to pay. However, Mr Carey argued it was not as if the Government is collecting all due real property tax anyway, given that some $522.266m was said to be outstanding at the end of the 2016-2017 fiscal year.

"I've been talking to some of my high net worth clients and passed this by them," he told Tribune Business. "I asked them if that was something they would be interested in, getting a discount of 20 percent if they paid 10 years' worth of real property tax.

"Everyone felt that was a very reasonable opportunity to benefit from. They get a 20 percent return in the market, which is not easy, and if they sell the home the tax is pro rated, so they get their money back. If someone sold their home within five years, they're going to get a return of five years' worth of real property tax.

"The buyer also benefits from buying into discounted real property tax. But it has to be something that goes for ten years even if the house is sold so there's no way to disrupt this. You also have to say that if the Act changes, these people cannot be impacted. It's a redeemable 10-year real property tax note. People will jump all over that."

Mr Carey said that convincing just 300 property owners, whose annual property tax payments are capped at $60,000, to pay ten years' worth at a 20 percent discount could generate some $144m for the Public Treasury.

He added that such a one-time cash injection would be especially valuable for a government whose direct debt is predicted to breach the $10bn mark by mid-2022, and with a record $1.3bn fiscal deficit forecast for the current period.

Mr Carey's proposal in effect would see the Government give up some potential future tax earnings in return for an increased short-term revenue injection that would bolster its finances amid the COVID-19 fall-out.

"You don't have to change the Act or make new laws. It would be pretty easy to do," he said. "It could apply to anybody. Someone paying $1,000 in real property tax per year could get that 20 percent discount if they paid $10,000. It's an attractive tool not only for foreign investors but locals.

"It's a lot of money that's sitting there. You have island owners, high net worth individuals, some of whom might have a fund making 5 percent. They liquidate that, use the funds to pay their real property tax, and double their money. There's an angle there.

"It gives the Government an immediate cash injection now, in the blink of an eye, without too many issues and it takes the fear out of taxes going up for these people while giving them a 20 percent return."

Some observers will view such an initiative as solely benefiting wealthy foreign investors, but Mr Carey said multiple administrations had allowed a mountain of real property tax arrears to accumulate by failing to enforce the law and lien it gives them over delinquent properties.

The Auditor General's report for the 2016-2017 fiscal year revealed that a total $522.266m in outstanding real property tax remained due and owing, with some $42.4m uncollected from that year alone. The balance consisted of some $309.1m due from prior years, and $170.76m in penalty surcharges.

Suggesting that nowhere else in the world failed to enforce real property taxes like The Bahamas, Mr Carey suggested that the Government give a two-year window for tax delinquents to pay up before starting foreclosure proceedings rather than wait to collect at the end when a property is sold.

He added that another key was to get Bahamian owners of undeveloped land to pay more in real property taxes, or incentivise them to develop their assets, adding that the exemption afforded to locally-owned land in the Family Islands may also have to be revisited.

But, as for his bulk real property tax discount proposal, Mr Carey said: "It's not something that's so far-fetched. It's not a business model that has a high level of failure... I would safely say it gained a level of attention in the conversations I had, and I think if the Government put it out there they would be surprised.

"I've not met anybody that does not think it's a good idea. I've not found anybody that doesn't think it makes sense. It's a redeemable 20-year note, and if administrations decide to change the tax rate it's guaranteed.

"People are afraid, very concerned, that they'll be targeted to eliminate some of the debt. If the Government ups the cap to $100,000 that would frighten off a lot of people. Why not eliminate that fear? Why not take advantage of an opportunity.

"I hate to use the cliche of a win-win, but if people are locked in for 10 days it gives them a lot of confidence they will not be targeted with bail-out measures. They're fearful and sensitive. A lot of them shop at Wal-Mart."