The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading realtor believes the Government is unlikely to replace Stamp Duty on property transactions with Value-Added Tax (VAT) for two-three years, giving it time to assess the latter’s revenue performance. David Morley, Morley Realty’s principal, told Tribune Business it was unlikely that the Government would completely eliminate Stamp Duty on conveyancings, pointing to the example set by Barbados.

The southern Caribbean nation levies both VAT and Stamp Duty on real estate transactions, having reduced the latter as it increased the former’s rate.

“The impression we’re getting from the VAT Unit is that they view Stamp Duty on the conveyance as equal to paying VAT,” Mr Morley told Tribune Business.

“They were putting a position paper to government that removed Stamp Duty from the conveyancing and replacing it with VAT. Whether that will carry through to residential and vacant land, as well as commercial sales, who knows.”

Mr Morley added that he “didn’t see them [the Government] giving up all the Stamp Duty”.

He said: “At this stage of the game, I don’t see it happening for possibly two to three years, until we see all the dust settling on VAT, and government better sees what new revenue streams they’re getting from VAT.”

John Rolle, the Ministry of Finance’s financial secretary, told Tribune Business earlier this week that the proposal to ultimately replace Stamp Duty with VAT would boost the Bahamian commercial property market by lessening the associated tax burden.

While Stamp Duty is a one-time transaction payment, VAT on commercial property transactions would be recoverable as part of a business’s costs.

“The Stamp Duty, when it converts and becomes VAT, it becomes a recoverable outlay for businesses,” Mr Rolle said.

“What we’re saying is until we get to that point, VAT replacing the Stamp, we’re not going to maintain the dual approach with both.”

Mr Rolle was unable to give a timeframe for when VAT would replace Stamp Duty on real estate transactions, agreeing with Mr Morley that a key factor will be whether the Government hits its anticipated revenue targets with the latter tax.

“I can’t make a prediction, but I know it’s one of those areas where we can have a decision made in terms of it being high on the list to review, once we see how VAT revenues are performing,” Mr Rolle told Tribune Business.

He added that the issue would require a policy decision by the Government, once it determined which tax was more preferable.

The Ministry of Finance confirmed in a statement: “Transfers of commercial property will only be subject to VAT on legal fees and commissions, and not the stamped conveyances.

“This will remain the practice until stamp tax on conveyances is reduced or eliminated.”