The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged to ‘outsource’ real property tax collection to the private sector, a well-known businessman suggesting it was almost ‘uncollectable’.

Acknowledging that such a move would be “unpopular” and difficult for the Government politically, Dionisio D’Aguilar said ‘contracting out’ real property tax collection could achieve the twin objectives of increasing revenues and reducing costs associated with its administration.

He added that by paying a private company fees tied to revenue, meaning it would be incentivised to maximise collections, the Government’s real property tax income would increase. It would also still earn around 95 per cent of whatever was collected.

Mr D’Aguilar, meanwhile, said the Government was “scared” to both tell the Bahamian people the truth regarding its fiscal predicament, and take Budget-related decisions that would be unpopular with voters.

Agreeing with Sunshine Homes chairman, Franklyn Wilson, that the Bahamas would be unable to “grow” its way out of $500-$550 million fiscal deficits, the Superwash president added his voice to those calling for a ‘balance’ of revenue rises and spending cuts.

A failure to do this, Mr D’Aguilar warned, would result in Wall Street further downgrading the Bahamas’ creditworthiness, a move that would “really threaten the foundations of our economy”.

Noting recent complaints that the Bahamian middle class was being “taxed into oblivion” by real property tax bill increases of between 200-500 per cent, and the Government’s long-standing enforcement difficulties when it came to collecting it, Mr D’Aguilar suggested the Christie administration adopt what, for it, would be a radical approach.

“Contract that out. Make it a business for somebody,” the former Chamber of Commerce president told Tribune Business.

He explained that once the method for assessing properties’ ‘market value’ was agreed and set, a private sector entity could do the valuations and collect due taxes on the Government’s behalf.

The company would be paid a ‘collection fee’, which Mr D’Aguilar said would likely amount to somewhere around 2-3 per cent “off the top” of the monies it received. This would result in the Government still retaining some 95 per cent-plus of all real property taxes collected.

“But that’s not popular,” Mr D’Aguilar said of his outsourcing idea. Nevertheless, he suggested that the recent bill hikes would only make it more difficult to collect a tax where there was already enormous revenue leakage.

“You make it too exorbitant, it becomes too hard to collect. You need to get a tax people will pay,” the Superwash chief told Tribune Business.

“People don’t pay property axes. You need to come up with a tax people will pay. That’s why they increased the exemption limit from $100,000 to $250,000. It’s better to charge people on something they will pay.”

Real property tax has been targeted by the Government as a key area for increasing revenues. Michael Halkitis, minister of state for finance, said consultants had told the Government it could ‘double’ current collections from their $92 million level - taking them close to $200 million.

And Moody’s, in its recent report on the Bahamas, said the Government planned to increase real property tax revenues from a sum equivalent to 1.2 per cent of GDP to 2 per cent. This would require revenues to increase at a compounded annual rate of more than 11 per cent, compared to their current 3 per cent growth.

Mr D’Aguilar said that when it came to generating new revenue streams, the Government should look at areas such as his repeated suggestion to levy a per minute tax on phone calls.

Arguing that this would “easily generate $10-$20 million for the Treasury”, he added: “They need to look at everything. Get rid of some government corporations. They can’t afford, for example, to sustain ZNS.”

With the Christie administration “fundamentally against” privatisation, Mr D’Aguilar said there was every likelihood that the taxpayer would continue to sustain multi-million dollar bleeding from the likes of Bahamasair and the Water & Sewerage Corporation,

“The politicians are scared to tell the Bahamian people the truth. The Government of the Bahamas has got to either raise taxes or cut spending, neither of which is politically, to balance the Budget,” he said.

“I don’t think we can grow ourselves out of these $500 million annual deficits, which are unsustainable, and the politicians are downright afraid to tell the people to tighten their belts. The Government does not have the strength to tell people the truth; we cannot go on as usual.”

While Bahamians were likely to be “screaming” if the Government made serious spending cuts, Mr D’Aguilar said there was “a lot of fat and waste” in the public sector.

“Unless the Government works out a way to raise revenue or scale back expenditure to get rid of these $500 million deficits, we’re going to be downgraded again, and that will really threaten the foundations of our economy,” he told Tribune Business.

“They’re [the Government] scared to make these decisions because they’re politically unpopular.”

Mr D’Aguilar argued that the Government needed to place projects, such as the new hospital in Exuma, on hold because it lacked the necessary finances.

“The Government needs to get its books in order,” he argued. “The Ingraham government got carried away and spent the capital Budget for the Ingraham years and the Christie years. They spent 10 years’ capital Budget in five.

“The Government needs to stop selling people the dream and give them the truth; hard facts. It’s better to have a sound economy and lose the election, than to have a shaky economy and win the election.”