The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas will enjoy a far higher real property tax compliance rate if the Government were to follow the National Insurance Board’s (NIB) lead and prosecute delinquent payers through the courts, a top private sector executive said yesterday.

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, told Tribune Business that the private sector was still not convinced that there was a “huge desire’ in government to tackle this nation’s $600 million-plus property tax receivable.

He said the Government had to focus on three factors - political will, enforcement and systems - if it was to make a major impact in collecting what was due to it.

Mr Bowe suggested that the Government employ the same tactics with major real property tax defaulters as NIB did when it hauled numerous prominent business owners before the courts for failing to pay due contributions on behalf of their employees.

This strategy was used under the former Ingraham administration by ex-NIB director, Algernon Cargill, and forced delinquent business owners to agree payment plans before the court, while also having a ‘naming and shaming’ impact.

Mr Bowe told Tribune Business that NIB saw improved contribution payments “purely because they dragged people before the court”.

“With real property tax, they need to do the same thing,” he said, “the same way NIB did, and then they will see greater real property tax compliance.

“We know the challenges real property tax has are three-fold. We really have to focus on enforcement, systems and the political will to make a major dent.

“Hopefully, some of that is starting, but not enough to convince the private sector there is a huge desire to get the numbers down significantly.”

The Christie administration has publicly stated it wants to double real property tax collections from 1 to 2 per cent of GDP, and has taken several initial steps to achieve this.

Apart from staging an ‘amnesty’ that netted around $20 million and gained 1,000 new properties for the tax roll, it has also moved to upgrade its information and mapping systems via information technology (IT) improvements.

The Kikivarakis & Co accounting firm has been hired as the first private sector real property tax ‘debt collector’, while the Ministry of Finance is also pruning its data base of real property tax delinquents to determine who owes what, and the sums that might be recoverable.

Mr Bowe, though, was speaking after Tribune Business revealed a report that found just over 5,800 non-compliant taxpayers owe the bulk - some 75 per cent - of the $633.416 million in unpaid real property taxes that were sitting on the Ministry of Finance’s books in 2010.

“The property tax arrears are heavily concentrated in only a few taxpayers,” the report said. “Only 168 taxpayers (0.6 per cent of total taxpayers in arrears) owe 25 per cent of the arrears, for an average of $943,040 each. Ten per cent of the taxpayers owe more than 75 per cent of the outstanding arrears amounts.

““There are 47,596 outstanding taxpayers who owe a total of over $633 million. The majority of outstanding arrears are owed by the commercial properties (61 per cent), followed by vacant land (25 per cent) and owner-occupied properties (15 per cent).

“On average, the commercial taxpayer owes $23,000, while the owner-occupied taxpayer owes $10,490 and the vacant land taxpayer owes $7,096.”

The BCCEC chairman said it was vital that the Government upgrade its information systems, so that it could accurately calculate past due property tax receivables and current amounts to be billed.

He added that "information is not up to the quality they need’, which in turn was causing location and assessment-related disputes with both residential and commercial property owners.

While acknowledging that the “glut” of distressed properties on the Bahamian housing market was a further disincentive for the Government to become a landowner, Mr Bowe said it was vital that it show it was serious about enforcement by seizing real estate belonging to major delinquents.

He added that it was the absence of “fear”, and the belief there were no consequences for non-property tax payment, which was helping to drive the high non-compliance rate.

Finally, Mr Bowe said the Government needed the “political will to act on it”. With wealthy businesses and individuals among those with the greatest arrears, he questioned whether it would “put the screws to those individuals to make them pay their fair share”.

The ‘Conditions for improving real property tax in the Bahamas’ report, authored by three experts in the field, recommended in particular that the Government target ‘vacant land’ owners who owe substantial sums to the Public Treasury.

Foreigners owning vacant land in the Bahamas owed the Government more than $156.623 million in unpaid real property taxes, and the report recommended that the greatest of these debtors be the “logical” first enforcement targets.

“Under the 2009 Amendment of the Real Property Tax Act, the Government was given the explicit right to seize and sell unimproved property for non-compliance,” the report’s authors wrote. “To maintain credibility, it will be important for the Government to take some symbolic action to enforce non-compliance against unimproved property.

“According to the arrears information from the Tax Department, there are 22,000 vacant land taxpayers who are in arrears for a total of $156 million, with average arrears of $7,000.

“A further analysis of the vacant land arrears shows that there are 38 vacant land taxpayers who owe more than $500,000 each. There are 237 vacant land taxpayers who owe more than $100,000 each. These are the logical taxpayers to target for the enforcement sequence.....

“International experience suggests that taking action on only a few cases will confirm the Government’s commitment to enforcement, establishing the political credibility and the impact on improving voluntary compliance.”