The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

PRIVATE sector executives yesterday expressed concern that proposed legislative amendments to provide certain companies with real property tax breaks were “too vague” and “wide open to abuse”, failing to conform with best governance practices.

A copy of the proposed Real Property Tax Amendment Act 2012, which has been obtained by Tribune Business, aims to exempt businesses impacted by infrastructure (roadworks) works, or which have made a “significant contribution” to economic growth by creating ‘sustainable jobs for Bahamians’, from paying the tax.

However, the legislation leaves the decision as to which companies qualify for these real property tax exemptions, the amount of tax break they will receive, and for how long, completely to the responsible Minister’s discretion.

Indeed, the Objects and Reasons section of the proposed legislation states: “The purpose of this Bill is to empower the Minister to grant additional concessions on real property taxes to any business which has suffered significant hardship as a result of any civil works to roads, or which have provided new, sustainable jobs to Bahamians.”

Responding to the Bill’s contents when contacted by Tribune Business, Winston Rolle, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, said: “That’s very subjective and that’s taking the Government in the wrong direction.”

While Bahamian companies have to submit “proof of such matters” that the Minister requires to determine whether they are eligible for the real property tax break, the legislation sets out no qualifying criteria.

And the proposed new Section 33 of the Real Property Tax Act says the ‘relief certificate’ that will be granted to companies will be “made subject to such terms and conditions, and for such period, as the Minister may think, and any such conditions specified in the certificate”.

In both instances, the decision as to who qualifies for the real property tax exemption, and the duration, amount and conditions attached to the waiver, are left entirely to the whim of the responsible Minister.

“It opens the door to a whole lot of things, and is a direction we shouldn’t be going,” Mr Rolle told Tribune Business.

“One of the challenges we have with our laws, and a pet peeve from my first period as Chamber president, is that we tend to confer a lot of power to the discretion of the Minister. I’m not sure that falls in line with good governance.”

Describing the proposed Real Property Tax Act amendments as “very far reaching”, Mr Rolle expressed concern that some drafted legislation was effectively “tampering with the rule of law”.

He added: “The concern is how do you define who is eligible and who is not eligible for these concessions. You’re going to have a flood of persons coming forward promoting their eligibility.”

Mr Rolle’s concerns were echoed by Rick Lowe, a senior executive with the Nassau Institute economic think-tank, who questioned how the Government would determine which businesses had been affected by civil works, and the extent of the impact.

The same applied to firms creating ‘sustainable Bahamian jobs’, Mr Lowe questioning how ‘significant economic contribution’ and other terms would be defined.

“They really need to manage that down a little tighter,”Mr Lowe told Tribune Business. “It would be a loophole to all sorts of abuse. It just politicises everything unfortunately. It’s all so subjective; that’s the problem.

“It’s typical of the way they write legislation, and I just wonder how all this flies with all these international agreements we’ve signed, all these amendments and proposals they’re making.”

That is a reference to the World Trade Organisation (WTO) and Economic Partnership Agreement (EPA), and the fact rules-based trading regimes such as these focus heavily on national treatment, and ensuring concessions offered to Bahamian businesses are given equally to their foreign counterparts.

Calling for the creation of a Review Board to assess real property tax exemption applications, rather than leave them to ministerial discretion, Mr Lowe said the private sector was in contrast subject to external audits and various controls.

Suggesting that the proposed Bill could leave the way open to making decisions based on politics, Mr Lowe said that with all the tax breaks being offered, the purpose of collecting real property tax was being defeated.

The Government forecasts annually to collect around $60 million from real property tax in the Budget, but every Auditor-General’s report refers to a $400 million-plus and growing some that remains outstanding and not collected.

“Why not just stop property tax collections if we’re going to start exempting everybody?” asked Mr Lowe.