The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian realtors have given a mixed reaction to the Government's decision to increase the annual real property tax cap by 25 percent to $150,000.

The Davis administration, in amendments to the Real Property Tax Act tabled in the House of Assembly to accompany the 2023-2024 Budget, has moved to further increase the maximum amount that can be paid by one taxpayer after doubling this sum during the previous fiscal year.

"Clause two of the Bill makes provision for the increase of the maximum tax on owner-occupied property from $120,000 to $150,000," the Real Property Tax (Amendment) Bill 2023 stipulates. The $30,000 increase, which will take effect from July 1, 2023, comes swiftly behind the prior year's $60,000 jump or doubling from $60,000 to $120,000.

The move is consistent with the Davis administration's Budget strategy of ensuring any tax or fee hikes fall on wealthy foreigners with the ability to pay, as they perceive it, rather than voting Bahamians. Most Bahamian homeowners and owner-occupied property will not be impacted in any way by this move as they fall under the $300,000 annual real property tax exemption threshold.

David Morley, Morley Realty's principal, said of the $150,000 move: "That's a lot of property tax to pay. I remember there was a lot of push back on that last year from those who live in high-end homes. I think everybody has to continue to pay property tax on a fair and equitable basis.

"I don't know what $150,000 works out to on the value of a property. I'm assuming it's going to catch 95-97 percent of all [owner-occupied] property. That's a lot of property tax someone has to pay on an annual basis. That's a pretty hefty property tax bill to pay. I cannot think what that represents and correlates to in terms of property value."

George Damianos, Damianos Sotheby's International Realty's chief, told this newspaper that the $30,000 annual increase was not significant enough to "hurt the industry" or its international clients. "Personally, I think the biggest impact on the market was the first jump from $60,000 to $120,000," he said.

"Any jump after that will only be affecting high-end luxury homes. I would say that this is not a big jump that will definitely hurt the industry. If you're talking about a man buying a $50m home he can definitely pay $150,000 in property taxes. I think they [the Government] should take a strong look under the Hotels Encouragement Act because a lot of people are skirting paying taxes and getting concessions for running homes like a hotel. There are houses under the Hotels Encouragement Act."

Mario Carey, chairman and founder of Better Homes and Gardens MCR Bahamas, questioned whether empirical data supported the Government's move and if it had consulted in advance with the Bahamas Real Estate Association (BREA) and its members.

"This is easy for them to do," he added, questioning how many foreign home owners will be caught by - and are sensitive to - such a shift in taxation. Mr Carey questioned whether the growing tax burden will create "an interesting gap or divide" in the real estate market that drives high-end purchasers to acquire property in developments such as Albany which enjoy real property tax breaks and other investment incentives.

"The Government, by making these changes, is driving investors to buy in these developments. We're on a dangerous slope," he warned.

Christopher Armaly, a prominent broker and appraiser, who previously called for the annual $60,000 annual real property tax cap to be raised to around the level now being set by the Government, told this newspaper last year that "it’s about time, don’t you think, for multi-million properties" when it was increased to $120,000.

While that “only increases the tax for properties valued over $6m”, Mr Armaly said at the time: “It’s a start in the right direction. It certainly puts it [the threshold] a little more in line with the $100,000-$120,000 a year area, which should be where it starts.” He had previously told this newspaper that the former $60,000 annual real property tax cap resulted in middle class Bahamians effectively paying a higher tax rate than persons with homes valued $10m and above.

All owner-occupied homes, meaning those residences used exclusively as dwellings by their owners, enjoy a tax break on the first $300,000 of their property’s valuation. A rate of 0.625 percent is applied to the next $250,000, and this increases to 1 percent for the remaining portion of the valuation above $500,000.

However, the $60,000 maximum limit on annual real property tax payments effectively left a $40m property owner’s tax rate at just 0.15 percent. That was four times’ below the rate applied to the $300,000-$500,000 portion of a property’s worth. Raising the cap to $120,000 doubled this rate to 0.3 percent, which was still below that being levied on middle class Bahamians.

Applying the former $60,000 cap to properties valued at $30m, $20m and $10m resulted in effective tax rates of 0.2 percent; 0.3 percent; and 0.6 percent respectively. Those doubled as a result of last year's increase to $120,000 to 0.4 percent; 0.6 percent; and 1.2 percent, with the latter two almost matching or exceeding the property tax rate paid on owner-occupied residences valued between $300,000 and $500,000.

“Should you and I pay the same rate as the mega wealthy?” Mr Armaly reiterated. “I’m not asking for the wealthy to be over-taxed. I’m asking for people like you and me to be taxed at the same rate.”