The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A realtor has urged the Government to examine whether it should impose real property tax on Bahamian-owned vacation homes in the Family Islands, plus vacant land in New Providence, in a bid to boost revenues.

Christopher Armaly, a realtor/appraiser with Morley Realty, told Tribune Business there were numerous options the Government could try to boost real property tax collections, rather than impose 200-500 per cent hikes on bills sent to those already paying this levy.

Suggesting that the Government offer a small percentage rebate off real property tax bills for those who paid early, Mr Armaly said the large increases currently being sought by the Real Property Tax Department were eroding rental income margins for commercial property landlords.

This, he added, was forcing landlords to pass on the increases to their tenants, either in the form of lease or Common Area Maintenance (CAM) rises. And, in turn, this was causing more hardship for tenants, especially retailers, who were now being forced to pay rents equivalent to 10-12 per cent of gross sales.

“If everyone paying taxes paid on time, maybe the Government wouldn’t get so desperate,” Mr Armaly told Tribune Business, suggesting it could offer discounts of 20 per cent and 10 per cent, respectively, to persons who paid their real property tax bills before June and August.

“That is a good incentive. Maybe it will bring people into pay,” he added. “There’s revenue there. A lot of revenue there from people who have the means to pay something but pay nothing, and from people in areas where you get evaluations saying you’re totally exempt. Making people who haven’t paid, pay, that would probably increase the revenue 100 per cent.

“They’re just going after the same neighbourhoods and same people. As a result, there’s going to be a larger, rather than smaller, percentage of people saying: ‘You know what, we can’t do this. We can’t pay this. Screw you.’ Repossession of properties, that’d be a public relations nightmare.”

Other avenues open to the Government when it came to increasing real property tax collections were an end to the numerous previously-granted exemptions.

Mr Armaly suggested that it look at imposing the tax on Bahamian-owned vacation homes in the Family Islands, bringing them into line with their foreign-owned counterparts. And he also recommended levying a “flat fee” on vacant, undeveloped land in New Providence - a property category also currently exempt from payment.

Arguing that Nassau could no longer subsidise the Family Islands, Mr Armaly told Tribune Business: “Maybe it’s time they started taxing those vacation homes in the Out Islands. If I own three-four homes in Abaco, I’m not taxed. A lot of those guys are renting them and getting income. Should it be taxed?

“I own vacant land in Nassau, I’m not taxed. Maybe have a flat fee on undeveloped lots, as an incentive to keep those lots clear. Maybe it’s time to hit them with a fee to keep the properties clear, and get extra revenue.”

And Mr Armaly added: “I don’t know if Nassau can subsidise any more like it used to..... You can’t have one city subsidising 20 islands. It’s just not happening.” He suggested that the Government remit a percentage of the tax revenues collected from the Family Islands back to those locations to finance local government.

The Morley Realty executive also warned that the dramatic increases in real property tax bills were hurting residential landlords, eroding the margins they required to pay mortgages and maintain properties.

When it came to commercial landlords, Mr Armaly said the real property tax increases - which the authorities are often seeking to make retroactive, going back several years - were being passed on to tenants.

Using the retail sector as an example, he said rental rates for this industry were ideally no more than 6-7 per cent of gross sales. Now they were rising to 10-12 per cent of gross sales, leaving retailers with little to no money.

And, in addition to lease rates, commercial landlords were also passing real property tax rate increases on via CAM charges. “The problem is on the business side of things, tenants can’t afford to pay more rent, and the rent is going to have to go up if they enforce these property taxes at ridiculous levels,” Mr Armaly told Tribune Business.

“Hitting commercial properties will drive landlords to play hardball on rental income. The wealthy landlords are not going to take the hit. They’re going to pass it on. It’s just how the law of the world works.”

Mr Armaly also questioned what property tax payers, particularly those in gated communities and condo owners, would get in return if they paid the increased bills. He noted that homeowners in such developments were already paying for essential services via alternative means, such as condo and homeowners association fees.

“They provide it all themselves, and are still getting hit pretty hard,” he added.