The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s plan to outsource collection of $557 million in unpaid real property tax to the private sector will “end in disaster” if not well thought-out, the principal of a Bahamian debt collection agency has warned.

Rory Higgs, head of Apex Management Services, told Tribune Business that while there was “precedent” for governments worldwide to outsource tax and debt collection to external agencies, the structure within which the latter operated had to be properly defined.

He also expressed surprise at suggestions from former Chamber of Commerce president, Dionisio D’Aguilar, that a foreign-owned debt collection agency would be “better” at collecting unpaid taxes because it would not be compromised by the family and political relationships affecting their Bahamian counterparts.

Mr Higgs told Tribune Business that during his 30-year career in credit and collections, he had been forced “on numerous occasions” to pursue Bahamian politicians from all parties over their unpaid debts.

He added that to be successful in debt collections, there was “no place” for political favouritism, as failure to make an effort to recover an account would undermine his professional reputation and cost Apex business.

Mr Higgs added that the solution proposed by Raymond Winder, Deloitte & Touche (Bahamas) managing partner, that the Government sell its unpaid real property tax debts to investors rather than engage debt collectors, was tailored to the US environment and would not work in this nation.

The Apex principal told Tribune Business that while he had discussed the potential outsourcing of real property tax collection with several government officials, they had yet to get to the fine detail.

“I’ve had discussions with two of the key persons, but it’s been no real, in-depth discussion, and for something like that needs to be a well thought-out plan for how this thing is going to work,” Mr Higgs said.

“I’ve seen a number of incentives done by banks and other entities that were not well thought-out and ended in disaster.

“There’s a lot of procedures and technology and know how that goes into this. It would take a very long time for the Government to ramp up itself right now, with VAT and everything else going on, in the short span of time they’re talking about.”

Still, Mr Higgs said numerous governments were ahead of the Bahamas in outsourcing collection of their debts and taxes to the private sector.

He pointed out that the World Bank and International Monetary Fund (IMF) had endorsed the concept that revenue collection was best enforced when the responsible agencies were commercial entities, separate from the state.

In the UK, Her Majesty’s Revenue and Customs (HMRC) has employed four external agencies to collect �140 million in outstanding taxes, while in Spain more than 800 private firms were working to collect 71 billion euros of debt owed to the government.

“There’s precedent for that,” Mr Higgs said. “Governments around the world have come to accept that practice, and accept it’s a more prudent thing to do.

“They’ve shown it can be done. There is no need to reinvent the wheel, as they’ve shown it can be done and it works.”

Refuting Mr D’Aguilar’s suggestion that foreign debt collection agencies would do a better job than Bahamians, Mr Higgs said: “First of all, I’m surprised at a comment like that coming from the former Chamber of Commerce president.

“Within my practice, I have had numerous occasion to go after politicians on both sides of the political divide.

“If an account comes to me, the client expects results, and if no action is taken they want to know why. Politics doesn’t come into play at all. I’m a professional in debt collection. There’s no place for it. I’ve never done it, and never will do it.

“I understand his [Mr D’Aguilar’s] concerns, but he has to realise that when dealing with professional collection agencies, there is no way of going after one party and not the next,” Mr Higgs added.

He suggested that any outsourcing of real property tax collection in the Bahamas needed to involve an open, transparent process that was open to scrutiny by both political parties so any allegations of ‘favouritism’ can be easily dispelled.

A further obstacle that foreign debt collection agencies will have to overcome, Mr Higgs said, was when litigation against delinquent accounts became necessary.

This, he added, would inevitably require the employment of Bahamian expertise, and raised concerns over whether “a gap in the process” will be created.

“The longer it takes to collect a debt, the harder it is to recover. Each month and year that goes by, you collect less on the dollar,” Mr Higgs said.

As for Mr Winder’s plan for the Government to sell its real property tax liabilities to institutional investors, the Apex principal said he knew “exactly where there that accountant is coming from” because Deloitte & Touche provided debt collection consulting services and analysis for local governments in the US.

“He probably thinks that could work here, but I can tell you from my knowledge of the market, what they’re doing in the US would never work here as far as debt collection is concerned,” Mr Higgs told Tribune Business.

“The tradition and mechanisms in the US, we don’t have here.”