The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

AROUND one-third of the properties that should be subjected to Real Property Tax assessments are not in the Government’s database, it was revealed yesterday, with 25 per cent of those that are benefiting from the ‘owner-occupied’ exemption.

Michael Halkitis, minister of state for finance, suggesting that the Government is only collecting half the real property tax revenues due to it anually, said it was estimated that 35,000 properties which should have been assessed during the 2011 tax year were not covered or registered in the Government’s database.

He added that of the 88,000 properties in the database, some 22,000 were benefiting from the exemption, while close to 50 per cent of those liable to pay real property tax were not receiving their bills.

Speaking at a ‘Meet the Minister’ forum hosted by the Bahamas Chamber of Commerce & Employers Confederation (BCCEC), Mr Halkitis said the Government was moving ahead with plans to reform and modernse the real property tax system .

“As has been amply documented, the real property tax (RPT) system suffers from many critical structural defects and, as a result, revenues generated by the system fall significantly short of the amounts that should rightfully be collected. Specific reforms have been developed which could readily double property tax revenues over the next five years,” said Mr Halkitis.

“The very first step in the reform process has been the identification of the major gaps in RPT performance relative to desirable norms. There are grave deficiencies in the property tax coverage ratio, the billing ratio and the collection ratio.

“Specifically, for the 2011 tax year, it is estimated that nearly one-third of the properties that should be assessed are not covered or registered in the RPT database. That amounts to about 35,000 properties being outside the system.”

Mr Halkitis added: “We are also narrowing in on how to remedy billing deficiencies. Of the 88,000 properties that are on the tax register, almost 22,000 benefit from the owner occupied exemption.

“We also have reason to believe that almost half of the non-exempt properties are not getting their bills for various reasons, including inaccurate billing addresses. It means that the Government is collecting only about half of what it should be getting from real property taxes.”

Mr Halkitis said there were also significant challenges with valuation ratios, as assessments “do not track changes in market values as closely as might be desirable”.

“In the view of experts within the Ministry, under a well-functioning system, we can allow up to 10 years to lapse between assessments,” the Minister added. “And so, when valuation adjustments occur, many property owners experience a sticker-price shock.

“In remedying these problems, the Government will most likely have to modernse the property tax legislation. We will have to adopt modern approaches that rely on intelligence gathered from satellite imagery and GPS technology.

“ We will also have to embrace Computer Assisted Mass Appraisal (CAMA) systems that are currently in use in almost every country. These reforms will have to be comprehensive. Through their implementation over the next several years, the RPT system will become considerably improved in respect of both customer service and revenue collections.”

With regard to the Stamp Duty exemption for first-time home buyers, which expires on June 30, Mr Halkitis said: “We introduced it in our last administration, beginning in 2002, with a limit of $250,000.

‘“The following administration suspended it for a while, then they introduced it with a limit of $500,000. We have to look at the whole issue and make sure it’s being effective, and see if there are any changes we need to make - whether with the limits or rate, and we will make a determination.

“The objective was to make it more affordable for people to afford their homes, and we think it has been successful. We just have to work out a couple of tweaks and then the Government will make a decision. I can’t say now what that will be.”