The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government failed to collect almost $108 million in due real property taxes during the 2011-2012 Budget period, a sum equivalent to almost 25 per cent of that year’s fiscal deficit.

And the Auditor General, in his report for the same fiscal year, warned there was “a high risk for fraud” as a result of the practices employed by the unit responsible for collecting real property tax.

The report said taxes were levied “using incomplete documents”, while valuation cards - showing the assessed values for each individual property - were not attached to their respective files.

The revelations, contained in the Auditor-General’s report tabled in the House of Assembly late Monday, are likely to again prompt questions as to whether the Bahamas would need Value-Added Tax (VAT) if it collected all sums due under the current system.

And, given the widespread and persistent real property tax non-compliance, many are likely to query whether the Government will fare any better with VAT.

“The outstanding real property taxes for the fiscal year 2011-2012 amounted to $107.662 million,” the Auditor General’s report said.

“In addition, the cumulative outstanding taxes for prior years totalled $476.865 million, thus giving a grand total of $579.601 million.”

The Auditor General, repeating a phrase he uses every year, described the $579.601 million in outstanding real property taxes as “exorbitant”, with the figure increasing annually.

“We recommend that immediate measures be implemented to address the problem of outstanding taxes,” he added.

Research by Tribune Business shows that the almost-$108 million in uncollected real property tax for 2011-2012 is equivalent to 24.3 per cent of that year’s $445 million GFS fiscal deficit.

Thus collecting that amount, featuring $92.763 million in current taxes, and $14.899 million in penalty surcharges, would have made a significant dent in the ‘red ink’ incurred by the Government.

The Christie administration, in fairness, has begun initiatives to enhance real property tax take and compliance.

A recent ‘amnesty’ saw around 1,000 properties added to the real property tax roll, and around $20 million in revenues collected.

The Government has also signed a contract with Tyler Technologies for a new real property tax management system, and is employing private debt collectors and examining legislative amendments - all in a bid to boost administrative efficiency and administration.

And, conversely, the $108 million in uncollected taxes indicates that previous estimates by Michael Halkitis, minister of state for finance, that the Government could earn $200 million annually from real property tax at maximum compliance, may not be too far off the mark.

Yet much work remains to be done, as shown by the Auditor General’s findings when it came to internal controls within the Business License/Valuation Unit responsible for collecting real property tax.

Describing the unit’s controls as “inconsistent”, the Auditor General’s report said: “In reviewing individual account files, it was noted that taxes were levied using incomplete documents, which creates a high risk for fraud.

“When assessments are carried out, copies of the valuation cards that contain the values calculated are not attached to the individual account files.

“Additionally, documents in the files were not properly attached and not properly referenced. Other deficiencies included the manual processing of tax billing.”

To cure these faults, the Auditor General called for “due care and diligence to be given to the implementation of proper internal controls, with processes and operations “consistent” across the Business Licence Unit’s different offices.

Staying with the ‘uncollected taxes’ theme, the Auditor General urged the Government to finally decide whether $51.572 million in casino taxes owed by operators who have long departed the Bahamas should be written-off.

The bulk of this sum, almost $37.5 million, is owed by two closed Grand Bahama casinos - the Lucayan Beach ($24.226 million) and the Casino at Bahamia ($13.219 million).

A further $5.13 million is owed by billionaire entrepreneur, Philip Ruffin, and his companies from the days when they operated the Crystal Palace casino at Cable Beach.

Carnival Leisure Industries owes $4.077 million from when it ran the same property, and Isle of Capri, a more recent operator of the Grand Lucayan’s casino, departed the Bahamas leaving an unpaid $4.921 million tax bill.

The Auditor General called for “urgent steps” to collect these taxes “before the opportunity to do so no longer exists”.

He also urged that a policy decision be taken on whether some of these sums were “uncollectible”, and should therefore be written off.

As for the 2011-2012 fiscal year, the Auditor General said that while Atlantis’s casino had paid all its basic taxes, it still owed $1.589 million of its due $10.033 million ‘actual gaming tax’ at year-end.

Baha Mar, meanwhile, had failed to pay all its $200,000 in basic tax. With $571,273 added to its ‘actual gaming tax’, a sum of $4.458 million was outstanding and owing to the Government at 2011-2012 fiscal year-end.

Ironically, it was Grand Bahama’s Treasure Bay-operated casino that owed the least, with an outstanding sum of $113,544.

This, though, was aided by the fact that Treasure Bay enjoyed a concessionary 7 per cent casino tax rate, rather than the normal 25 per cent.