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$1BN BLACK HOLE OF UNPAID TAXES: Inland Revenue reveals scale of outstanding arrears by Bahamians

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

The Government’s top revenue agency yesterday revealed that “unacceptable non-compliance” by Bahamian taxpayers had resulted in the build-up of $1bn in outstanding tax arrears that it was now aggressively pursuing.

Shunda Strachan, the Department of Inland Revenue’s acting director, speaking as the Revenue Enhancement Unit’s new Carmichael Road headquarters were formally unveiled, said: “Over the last several years, we have seen an unacceptable rate of non compliance.

“In total, taxpayers have failed to file or to pay close to $1bn. We are seeing an increasing number of businesses that are failing to renew their Business Licenses and their VAT (value added tax) returns. Worse yet, we have identified businesses that are intentionally under-recording [the value of transactions] to avoid what they are obligated to pay.”

Ms Strachan did not specifically identify the areas where these arrears have accumulated, although her words indicated that VAT and Business Licence fees are two. The others are likely to include real property tax and Customs duties, as all four are the main target areas that the Revenue Enhancement Unit is focused on when it comes to pursuing bill-ducking tax cheats.

The timeframe when these arrears accumulated was also not identified, although the last full-year report by the Auditor-General revealed that some $600m in outstanding real property taxes were owed at the end of the 2017-2018 fiscal year. Focusing on real property tax, the Department of Inland Revenue chief said: “In terms of categories we do know that the greatest category of delinquency is in our commercial properties.

“So those are the persons or the property owners that have commercial properties. More than 70 percent of our arrears stem from there. Then, after that, we have the category of persons with vacant land or foreigners who own vacant land.”

Given the Government’s strained financial position, with the national debt now over $10.5bn and still growing, Ms Strachan reiterated that the Government plans to get tough with tax delinquents. The collection/enforcement measures could see the Department of Inland Revenue seek to “garnish”, or take a lien over, wages, revenues and bank accounts, she said, along with the imposition of sanctions such as penalties, surcharges and fines.

Private collection agencies have also been hired to pursue outstanding real property taxes. Ms Strachan said: “This time around, we have engaged private collection agencies with all those accounts that have been consistently delinquent.

“I must stress knowing your real property tax status is a responsibility that comes along with property ownership. So the real property tax reassessment initiative [by Tyler Technologies] was just one of the many efforts that we have embarked upon to begin the compliance process.”

The Ministry of Finance has already served notice on all financial services regulators and their mortgage-lending licensees that it plans to finally use powers it has long-possessed under the Real Property Tax Act to require the latter to pay tax on behalf of their borrowers who are in arrears.

The Government is pressuring the banks and other financial lenders to ensure their mortgage clients and up-to-date, and have no outstanding real property tax arrears. Institutions have responded by urging borrowers to become current, given that outstanding taxes would supplant their security as a first lien over the subject property, and warning that the situation could impact their mortgage loans and whether they remain current.

It previously contracted Tyler Technologies to conduct an island-wide mapping exercise of New Providence that ensured all properties are captured on the real property tax roll. This, and the subsequent revaluations, are a first step in what the Government views as a wide-ranging exercise that will lead to all taxable property owners paying their fair share.

Ralph Munroe, deputy comptroller of Customs, said the agency continues to be challenged by importers submitting false or under-valued declarations in a bid to avoid or evade the full payment of due taxes. He described the problem as “significant”.

As an example, Customs may only collect 85 percent of what is due to the Government. While “that’s a high figure”, and results in the agency collecting $800m per fiscal year, that 15 percent which is missed is equivalent to $120m which the Government never realises.

“Most of it is due to undervaluation, and not that persons don’t declare, but it is with false declarations. Then it depends on the classification. If you entered the wrong rate or an undervaluation, then give us a value that will reflect the actual cost of the transaction,” he said.

Simon Wilson, the Ministry of Finance’s financial secretary, said the Government “has the tools” to determine which goods are undervalued. This was easy to determine with vehicles, he added, as the Ministry of Finance has access to the same valuation books that importers use, As a result, it would be difficult to pass vehicles through Customs using a false declaration that under-values the purchase.

Comments

K4C 3 months, 2 weeks ago

Estimated population for 2022 is about 400K

do the math

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KapunkleUp 3 months, 1 week ago

$2,500 for every man, woman and child.

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K4C 3 months, 1 week ago

most today have difficulty putting food on their table,

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Dawes 3 months, 2 weeks ago

Maybe many of those businesses have gone under and are no longer operating. Yes they should have notified Inland revenue, but they may not have known so that's OK (at least it is per new MP's who haven't declared as they are meant to, so that should go across all aspects of life here). Aside from the above at a guess we will never hear of any company or person being taken to court for these unpaid items, so i expect deals will be made. Unless of course that person happens to have annoyed someone in Govt and then it will be front page news.

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Sickened 3 months, 1 week ago

Garnish wages. LOL. They can only do that for government workers and even that would be highly controversial and the party would lose the next election. Not going to happen. As for ducking customs duty.... please let me know how that's possible because when I bring in a container I have to pay in full before it leaves the dock. Am I the only fool being asked to, and paying, beforehand?

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tribanon 3 months, 1 week ago

Obviously you're not a member of the corrupt, privileged, and elitist political ruling class. If you were, you would never find yourself having to pay much in the way of duty on anything that you import from abroad.

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moncurcool 3 months, 1 week ago

So they are going to go after tax delinquents. Fine. Trust they also enforce the law against MPs who did not follow the law and file their disclosures.

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OMG 3 months, 1 week ago

Many foreign home owwners either find it difficult to pay their property tax or deliberately never pay it and upon sale come to an agreement to pay a portion. So 10 or 15 or 20 years of lost revenue, lost interest and inflation reducing the value for the government.

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DDK 3 months, 1 week ago

How many sets of Bahamas governments are responsible for this state of affairs? I estimate 14.

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Flowing 3 months, 1 week ago

How many irresponsible Bahamian citizens?

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DDK 3 months, 1 week ago

Why pay civil servants in these various agencies if they are incapable of collecting the taxes and fees and private collection agencies have to be paid to do their jobs, no doubt more nepotism. More than sickening......

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Proguing 3 months, 1 week ago

No news taxes until that $1 billion of unpaid taxes is collected!!!

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tribanon 3 months, 1 week ago

Perhaps corrupt Davis can vociferously beg and eventually persuade Communist Red China to pay all of the unpaid taxes as well as all of the paid taxes that were stolen.

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TalRussell 3 months, 1 week ago

Comrades, imagine the potential positive blackhole if in time pre 50th Independence Day celebrations, were to boot all foreign fast-food joints off The Colony, ― Yes?

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John 3 months, 1 week ago

WHEN a large sector of an economy is either failing to pay taxes and/or refusing to pay taxes or all of them, it is an indication that something is drastically wrong in that economy. FIRSTLY the tax system does blatantly discriminate against Bahamians, Bahamian businesses especially, in than most of the tax breaks and concessions are given to foreigners. And foreigners operate some of the most profitable and lucrative businesses in the country and if they are not able to pay taxes , imagine Bahamians. Take for example. A major resort vs a mom and pop shop. They both buy a can of soda for 75 cents. The mom and pop store sell the soda for $1.00 across the board. But the resort sells its soda in various formats ranging from $ 3.00 say on a lunch menu to $7 or $8 at a night club or for room service. .

Some businesses and persons are unable to pay all their taxes. When Vat was introduced in 2017, it was supposed to replace customs duties. But in its greediness, government chose to tax its Bahamian people both Customs duties and VAT that is also calculated inclusive of customs duties. So government is essentially collecting in excess of FIFTY PERCENT TAXES on most retail goods, even before they leave the port. Not only has this driven up the cost of living in The Bahamas, especially on the family islands but it has created critical challenges for retailers. FIRSTLY, through their own admission, customs barely collects 50 percent of the customs duties owing to it. This means there is widespread smuggling going on throughout the country. So the legitimate business operator, who is trying to pay his taxes, or most of it, must now compete with the smugglers, who may pay little or no taxes. So even though the legitimate business owner may be allowed to stay in business and operate, his profits or even profit potential is highly diluted. . . And another problem businesses face is because government has placed such a high leverage of taxation on imported goods, the cost of carrying inventory is so astronomical, many businesses can no longer see a profit. They have to contend with inventory shrinkage, damaged inventory and even obsolete inventory. And customs duties and vat has been paid on all these items.

One business owner was explaining his frustration. When he brings in new inventory, he cuts a check for several thousand dollars. Every 21 of the month he must remit his vat payments to go for several more thousand dollars. Then there is business licenses and national insurance aabd property taxes that all go to the government. And when the end of the year comes, the accountant says the business did not make a profit. So figure that. A business paying over $100, 000 a year in taxes but can’t realize a profit. And, according to him, some businesses have it even worse than him. Some businesses have to BORROW money to pay their vat returns. Obviously piling debt on top of debt. And for those businesses, it’s just a ma.

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John 3 months, 1 week ago

Simple law of Economics: keep taxes low and collect small amounts from many persons. Make taxes high and collect big amounts of taxes from less people.

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