The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Fears were expressed yesterday that the Government’s real property tax crackdown is seeking to “retroactively” extract more revenue from compliant owners on the grounds that their homes/businesses are under-valued.

Attorneys, realtors, businessmen and MPs collectively called for the Ministry of Finance to clarify this element of its tax enforcement drive, amid concerns it will impose an extra, unwarranted burden on taxpayers who had no reason to believe they were non-compliant.

Richard Lightbourn, the FNM MP, raised the issue in the House of Assembly on Monday night, and yesterday told Tribune Business that “a lot of litigation” would likely result should the Government hit compliant owners with retroactive ‘back tax’ bills.

He confirmed that his reading of the Ministry of Finance’s statement was that the crackdown’s targets include owners who have been “under-paying” due taxes because the Government’s assessments are either outdated or under-valued.

“That’s how I understand it,” Mr Lightbourn, an attorney, said. He added that the Government side “didn’t get up and correct me” when he raised the matter in the House of Assembly.

“How can you have an assessment sent out every year by the Government - they are bound by that assessment - and you are now talking about going back and making it retroactive? No way,” the Montagu MP said then.

The Ministry of Finance, unveiling a wide-ranging offensive against real property tax delinquents, said: “Analysis of real property tax assessments reveals that a substantial number of property owners in the Bahamas are under-paying their true tax liability, either because the valuations are out of date, the properties are misclassified, or they are unregistered entirely.

“In the very near future, the Ministry will courier communications to 5,000 property owners, requesting payment of their additional property tax assessments together with their regular tax bill..... The value of these properties will be re-assessed if they were not assessed during the last five years.”

The Ministry, and its Department of Inland Revenue, are thus casting a wide net in a push to catch as many defaulters, and types of non-payment as possible.

Mr Lightbourn, though, said the language was “clearly inferring” that the targets included home and business owners who, in good faith, had been paying their real property tax bills in full and on time based on the assessments sent to them by the Government.

The Ministry’s announcement, he added, implied that these ‘compliant’ owners may now be hit with an additional bill for retroactive taxes when the issue of under-valuation was the Government’s problem - not the taxpayers.

Mr Lightbourn told Tribune Business that the Real Property Tax Act does include provisions requiring owners to file a declaration every year.

They are supposed to place a value on their real estate holdings, and state if any improvements or additions have been made to the property, so that the Government is able to determine an accurate valuation for real property tax purposes.

Mr Lightbourn said the Government could theoretically use this to legally justify retroactive real property tax billing, but its failure to enforce such annual declarations would likely undermine its case.

“They’ve never, ever, since the thing was implemented way back when, enforced it,” he told Tribune Business.

“I don’t think they could suggest that through your failure to file that declaration we were not aware of improvements to your property, and because of that we can hold you to that failure.

“I can understand it if someone’s not been paying taxes and they’ve added a whole house. In that situation, they will be able to recover it, but because they’ve never enforced that, they will only get the assessed value.”

Mr Lightbourn continued: “I really don’t see how they’d be able to go back and say we assessed it, or didn’t, and sat on the ball and did nothing. It’s the Government’s problem, not yours.

“There’ll certainly be a lot of litigation, or maybe argument, if that’s the route they plan to take. I’m not aware of any [real property tax] case that has got to court and the estoppel argument is made.

“But you can be damn sure it will be made if an assessment is done, people say they’ve paid religiously year after year on that, and a new valuation is done. That’s your problem, not mine.”

The McKinney, Bancroft & Hughes partner added that numerous legal issues would arise if the Government sought the retroactive recovery of real property tax from ‘compliant’ taxpayers.

“We’ll see how it pans out,” he added. “When you look at the problems the Treasury has had over the years in collecting real property tax, it seems an extraordinary way to add fuel to the fire; introducing a whole slate of new issues when you can’t collect what you have now.”

Mr Lightbourn’s concerns were echoed by Robert Myers, principal in the Organisation for Responsible Governance (ORG), who also urged the Government to target all real property tax defaulters - not just homes in wealthy and upper middle class communities, as the Ministry of Finance said in its statement.

“You can’t just go after the affluent communities; it’s one law for all or no law at all. I don’t think that’s fair,” Mr Myers told Tribune Business.

“The other thing I would say is that if the Government doesn’t do its job of assessments of properties, I don’t see how they can go to the citizenry and say you’ve not paid your fair share of tax.

“If you’ve got a process for assessment, that’s the basis you go on. You can’t come back and say: ‘You owe us hundreds of thousands of dollars’. That’s like saying we didn’t do our job, but still want to get paid,” he added.

“Those years are closed off. You’d put people out of business if you start doing that. We’ve got to start taking responsibility for our own actions. If your own inaction caused you in government to miss out on revenue, that’s not the business or property owner’s fault.”

Mr Lightbourn also questioned why the Government would seek to squeeze more money from compliant real property taxpayers when it consistently let delinquents off the hook.

Pointing to the frequent ‘amnesties’, the Montagu MP said penalties were waived for defaulters who managed to pay their tax liabilities by a certain date.

“Most countries that profess to have an organised tax collection system would enforce it,” he told Tribune Business.

“In the US, if you don’t pay they can sell your home within months. Here, we don’t do anything. I don’t think they have ever sold a landowner’s property to enforce taxes. Never. They wait for you to sell the property before trying to collect on it.”

However, Mr Lightbourn backed the Government’s intention to target the larger, more blatant instances of real property tax evasion, such as the failure to bring accurate conveyance documents forward for Stamping and recording.

The Ministry of Finance’s offensive is also targeting properties that are not on the tax roll, plus those commercial properties that have been wrongly classified as residential, thus enabling them to ‘under-pay’.

Mr Lightbourn’s brother Mike, president of Coldwell Banker Lightbourn Realty, was sceptical that the Government could - or would - seek to impose additional real property tax retroactively on compliant taxpayers.

“The Government needs revenue, and I can see the desperation, but that’s not going to happen,” he added.

“That makes no sense. I think they’re just trying to scare people. I can’t see them going after people who have paid their taxes, and then tell them they haven’t been paying enough. I don’t see that happening.”