The Tribune

• Say finally ‘movement’ by tax authority

• Silence met ‘good faith’ settlement efforts

• Collector: Most ‘egregious’ case I’ve seen

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Long Island property owner and his family yesterday voiced optimism that their decade-long battle to settle disputed real property taxes may finally be drawing to a close.

Freddie Jones told Tribune Business there suddenly appeared to be “some movement” by the Department of Inland Revenue (DIR) after his efforts to resolve a five-fold difference in the valuation of their properties had been met with a two-year silence.

The outreach by Gaynell Rolle, the Department of Inland Revenue’s acting controller, came after this newspaper started making inquiries over Mr Jones’s complaint that his “good faith” efforts to agree a settlement with The Bahamas’ main tax collection agency were not being reciprocated.

The New York state native’s assertions were backed by Kevin Brennan, principal of RPT Recovery Authority, a US-based company that until 2019 was contracted by the Ministry of Finance to pursue overseas-based real property tax delinquents.

He described the plight of Mr Jones and his two sisters as being “as egregious as any that I’ve seen” in terms of the Department of Inland Revenue’s failure to properly engage with a property owner who was willing to settle and pay a significant sum in tax at a time when the Public Treasury needs every cent of revenue it can get following Hurricane Dorian and COVID-19.

Confirming that Ms Rolle had contacted him, and mentioned that his sisters would be eligible for a 100 percent waiver on the outstanding penalty charges if they pay the outstanding principal, Mr Jones acknowledged he was likely not a high priority given that the total taxes being demanded total around $108,000.

However, arguing that “I’ve got to believe there are others just like us, he added that his family have set aside “a significant sum” in escrow that will be used to pay the real property tax provided the Department of Inland Revenue is finally prepared to agree what he described as a “reasonable” settlement.

Mr Jones, describing how he and his family arrived at their Bahamas impasse, said they had been on a near ten-year journey of “frustration, anger and sadness” via their dealings with multiple senior government officials after they themselves alerted the Ministry of Finance and its agencies to potential tax liabilities and issues with their properties.

He revealed that his family’s association with Long Island began in the 1960’s when his father’s cousin was one of the original developers of the Cape Santa Maria property. His family started visiting the island in the late 1960s, and Mr Jones said they were twice-yearly visitors from the moment he was born in 1970.

His family acquired lots at Cape Santa Maria, but ultimately their properties were in the way when a new developer took over the resort. To solve the problem, Mr Jones said they “struck a deal” whereby he and his two sisters agreed to exchange the family’s real estate parcels for lots B-24, B-25 and B-26 on nearby Galliot Cay in a 2002 arrangement that was brokered by the late Peter Graham.

The former Graham, Thompson & Company founding partner represented both buyer and seller in the transaction, with the lots priced at $100,000 apiece. Mr Jones said that while Mr Graham had informed him the conveyances were lodged for recording in the Registry of Records, thereby securing the passing of title, he received no confirmation that the property tax unit was informed of the sale.

While Bahamian-owned land in the Family Islands is not subject to real property taxes, foreign-owned land is. The sale to Mr Jones and his sisters thus meant the lots started to attract real property tax from 2002, but the former said he did not want to attribute blame to Mr Graham because the notification may have become lost in the bureaucracy.

And, while failing to record property sales to foreign buyers and/or notify the authorities of the sale is a long-established tax avoidance practice when it comes to Family Island real estate, Mr Jones said he and his sisters were unaware of the need to notify the Ministry of Finance and assumed that Mr Graham had dealt with everything.

He added that he and his family only became aware, via a conversation with a Long Island resident in 2011, that taxes may be due and accruing on their lots. Mr Jones said they themselves alerted the Ministry of Finance to the likelihood that taxes were due and had been accruing since 2002, triggering a 10-year saga that continues to this day.

He added that the three lots were still in the name of Mr Graham’s company, Calabash Ltd, but on November 28, 2012, the first bill of $39,640 - for back as well as current taxes - arrived based on a $525,000 valuation of Mr Jones’ lot.

This was a sum more than five times’ what he had paid to acquire the lot, and he said: “It was my family that first discovered this error, not the Ministry of Finance..... That resulted in a tax bill we have disputed from day one and attempted to resolve for more than ten years.

“Repeated is a gross under-statement. We’ve made well over a dozen attempts at outreach to three different people to get this resolved.” Mr Jones said he first met with David Cates, then acting head of the Licensing and Valuation unit in December 2012, who “gave a verbal assurance they’d be willing to settle the matter” and address the complaints of an unrealistic valuation.

Mr Jones said he obtained a realtor’s appraisal in March 2013 valuing his lot at $285,000, which was nearly 50 percent lower than the Government’s valuation. He and his sisters all sent in “notices of objection” to their tax bills and valuations, with his siblings obtaining similar valuations.

In the meantime, Mr Cates had been replaced by Roger Forbes, who told Mr Jones and his sisters to deal with his officials. In the meantime, the family’s frustration grew as tax bills continued to be sent to Mr Graham rather than themselves and, while the valuation for Mr Jones’ lot was adjusted based on the new appraisal, his sisters’ taxes continued to be based on the $525,000 valuation.

After five years of trying to resolve the dispute, Mr Jones said that in 2016 he was confronted with a letter from Mr Brennan, at RPT Recovery Authority, threatening that the Government would seize and sell-off his lot to recover the outstanding property taxes due unless they were resolved.

After explaining the situation to Mr Brennan, and after outreach to the Department of Inland Revenue proved fruitless, Mr Jones said: “It became clear we had to sell one of the lots to pay the taxes claimed or they’d move on all three lots. We put it for sale at the appraised value of $285,000, but had no offers.

“We started lowering the price and received an offer for $130,000, which is one-quarter of the astronomical value the Department of Inland Revenue put on it. These are rock lots; they are not beach lots.

“We had no choice but to accept the offer, but the buyer was told by the Department of Inland Revenue that the lot was listed at a significantly higher value in their system and wouldn’t accept the purchase price [and the Stamp Duty, now VAT due on it].

“The Department of Inland Revenue was blocking the sale because they were not going to get the tax they thought,” Mr Jones added. “To get the Department of Inland Revenue to accept the sale the buyer had to get another appraisal and that valued it at one-third of the Department of Inland Revenue value, $160,000.”

The delay in completing the sale meant Mr Jones’ ownership went into another tax year, resulting in an additional bill with growing penalties and surcharges, thereby forcing him to pay even more. “And to add insult to injury, to keep the buyer at the table and close the sale, we had to pay additional VAT on the appraised value to the buyer at a price 40 percent higher than we were selling at,” he added.

Disputes with the Department of Inland Revenue over sales prices/valuations, and the amount of tax due, are relatively commonplace. While the sale settled outstanding taxes on his former lot following what he described as a “coerced” sale, Mr Jones said his sisters retained ownership of theirs along with the disputed billings.

He explained that he was advised by his attorney, Chad Roberts at Callenders & Co, not to take legal action against the Government due to the costs involved but to instead seek to settle the matter with the Department of Inland Revenue.

Mr Jones said he reached out to Ms Rolle in late 2018, and at a virtual meeting with her in January 2019 made an offer on his sisters’ behalf to settle the dispute. He added that Ms Rolle promised to reply within four days to his proposal, but he had been waiting more than two years for a response until her contact last week.

“In the meantime we continue to receive tax bills,” Mr Jones told Tribune Business. “My sister just received them a week ago, and they are calculated on the original value assessed by the Department of Inland Revenue that are not credible and four times’ what the value of a lot is based on the most recent appraisal.

“I’m exhausted from the process. It’s been money for me, it’s been a lot of lost hours for me. I would say that I’m extremely disappointed, and frustrated at the lack of communication and reciprocity of goodwill here. Given the Budget situation, it’s difficult to watch people I know and love in the Family Islands suffer when there’s $600m in outstanding real property tax due.

“We’re not wealthy people. I realise in the grand scheme of things we’re not a $5m tax bill, but I’ve got to believe there are others like us who want to get this thing settled and hopefully this will help. We’ve withdrawn our previous offer and will negotiate when they [the Department of Inland Revenue] get here. We have a significant amount of money sitting in an account that we are ready to pay and settle..

“To say this matter is astonishingly unfair is a gross understatement in my view. There has now been a decade-long series of misjudgments of this situation, and lack of communication and transparency with us around what is going on.”

Mr Brennan, of RPT Recovery Authority, described what Mr Jones and his family had gone through as “unbelievable but it is what it is”. He added: “I don’t know if I’ve seen any as egregious as Mr Jones’ but it’s not good. It’s unfortunate.

“This is not all that unusual. The reason being is that valuations are all over the place. That’s a big issue. There are two big issues. One is communication. I’ve seen a lot of taxpayers go missing in the records. From my perspective it’s a little bit chaotic.

“I have seen many instances where taxpayers are made aware of their obligations, and as indicated often times these folks are not aware of them,” Mr Brennan said. “They may be professing that, but in many instances bills are not getting sent out. I’ve seen many instances where bills for international persons are sent to general delivery in Nassau. It’s all over the place. Your issues are communication and valuation.”

Ms Rolle confirmed the 2019 meeting with Mr Jones, but said that when she checked her officials at the Department of Inland Revenue said the issues with the appraised value on his sisters lot had been addressed and tax bills to reflect this were being issued to them.

She urged his sisters and others disputing real property tax bills/valuations to pay the portion that is not being contested, adding that too often these differences were used as “an excuse” to avoid paying a single cent to the Public Treasury. Ms Rolle said $54,000 in taxes was owing on both lots, making for a total $108,000.

“Any objections to the billing, once raised by the owner or an authorised representative, is entertained by the Department. A reassessment of the property values were completed a few years back and the owners were notified by billing communication. The communication could have been shared with Mr Jones by the owners should they have wish to do so,” Ms Rolle said.

Mr Johnson said he was unable to comment on the specifics of the case involving Mr Jones and his sisters, but said: “As a general matter of principle we work with people all the time who have sums outstanding to come up with payment plans for getting this resolved.

“We’re not in the business of not responding or ignoring people when they approach us. We do our best to get the matter settled. That’s generally our approach.”