The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is aiming to consolidate the 'stamping' of real estate conveyances at "one location" in a bid to ease private sector concerns about ever-increasing bureaucracy.

K P Turnquest, the Deputy Prime Minister, told Tribune Business that the Minnis administration was already examining whether legislative changes are needed to eliminate "the running up and down" between the Department of Inland Revenue and Public Treasury.

He said the Government was hoping to "streamline that process in the next couple of months", acknowledging that VAT's imposition on real estate sales had added another step to an already-cumbersome process at a time when the Bahamas is desperate to improve its global 'ease of business' ranking.

The 7.5 per cent VAT levy, which has largely replaced Stamp Duty as the primary tax on real estate transactions, means buyers and their attorneys now need to have the sales documents 'stamped' by both the Department of Inland Revenue and Public Treasury to confirm all due taxes have been paid.

Previously, when Stamp Duty was the sole levy, conveyances only had to be stamped at the Public Treasury. VAT's introduction has therefore added more time and delay to a process that is often further lengthened when one or both government agencies challenges the purchase price, forcing parties to the deal to pay for an appraisal to justify this figure.

"We've started to look at it to see if we can consolidate into one location the payment of Stamp Tax and VAT rather than having people run up and down to the Treasury and Inland Revenue," Mr Turnquest told Tribune Business.

"Hopefully, in the next couple of months, we will be able to streamline that process in view of our overall ease of doing business objectives." Such a reform, if enacted, will benefit both Bahamian and foreign parties to a real estate transaction by reducing time and costs.

Mr Turnquest, who is also minister of finance, added that the Government was exploring whether legal changes were necessary to empower the Department of Inland Revenue to collect real estate-related Stamp Duty on the Public Treasury's behalf.

"The issue is that the Stamp Tax is administered by the Treasury, while VAT is administered by Inland Revenue," he explained. "It may even require some changes in law. That's one of the things we're looking at; whether the VAT Department can be authorised to collect Stamp Tax on real estate transactions."

The Deputy Prime Minister was speaking after multiple commercial attorneys last week warned that growing 'red tape' in the real estate transactions approval process was threatening to undermine both foreign investor confidence in the Bahamas and any effort to improve this nation's 'ease of doing business'.

They revealed that the Central Bank's increased regulatory requirements, combined with the 'two-step' stamping process and other impediments, were subjecting deals to multi-month delays, and causing "uncertainty and anxiety" among the foreign direct investment(FDI) community that drives the Bahamian economy.

Several attorneys spoken to by this newspaper said the situation was undermining the very underpinning of foreign investor confidence in the Bahamas, which is their ability to monetise real estate investments, and get their money out quickly and securely.

Confirming that the Government was aware of such concerns, Mr Turnquest pledged they would be "taken seriously and addressed" as it wanted to avoid any unnecessary delays when it came to approving real estate deals involving foreign parties.

He added that the Minnis administration wants "commerce to flow freely" and provide all parties with "value for money", but this has to be balanced by ensuring the Government collects all due revenue on real estate deals.

"It's always a balancing act," Mr Turnquest said, promising that parties aggrieved by the Government's rejection of their stated purchase price could appeal and be assured of "a fair hearing".

"We have heard from the attorneys and real estate agents, and they've registered their complaints," the Deputy Prime Minister added. "It's a significant issue. We take them seriously, and want to address them by making the process as efficient and cost effective as possible.

"Some of these changes may be legislative, others may be procedural. We don't want to be delaying, or in any way inhibiting, commercial transactions. We want commerce to flow freely, and for all stakeholders to feel the process is fair and they've got value for money."

Mr Turnquest said that while the Government had not been overwhelmed with concerns over real estate deal 'red tape', there were "enough for us to be concerned about the issue to pay attention to it".

Attorneys have told Tribune Business that the stamping 'turnaround time' at the Department of Inland Revenue and Public Treasury was seven and three days, respectively, provided there were no objections to the sales price or other factors.

Frederik Gottlieb, the attorney and former MP, last week railed at the increased frequency with which one or both of these agencies were rejecting the purchase price as stated on conveyances.

Believing that transaction values are being under-reported in a bid to avoid due taxes, the two government departments are said to be increasingly forcing buyers to pay for further appraisals to justify the price paid.

Mr Gottlieb called on the Government "not to treat every other conveyance as being suspect; that the price expressed therein is a potential fraud".

"That's what we're experiencing now," he told Tribune Business last week. "We provide a conveyance, and they don't accept the price that's been negotiated in good faith between the parties, plus the appraisals that have been done. It's very unsatisfactory and never used to be like this."

And Mr Gottlieb added: "VAT has introduced another layer of bureaucracy. To get a document stamped you have to get it stamped by the Department of Inland Revenue for VAT or marked 'exempt', and then go to the Treasury.

"I've had instances where the VAT Department had no problem stamping the document based on the conveyancing price, but then the Treasury required an appraisal. All this makes it difficult to complete transactions and allow transactions to flow..... There are so many things that are creating uncertainty and anxiety for these investors."

Many realtors have privately told Tribune Business that the Public Treasury appears to still be applying pre-2008-2009 recession values to real estate deals, and failing to account for the subsequent fall in market values, which they suspect is resulting in the frequent challenges to transaction prices.

Mr Turnquest acknowledged that the Public Treasury has been applying "increased vigilance" on conveyancing values, and said: "Historically there's always been a push and pull.... as many try to drive down the amount as far as payment where the Tax Department is concerned.

"We just want to make sure we get a fair value so the Government derives what is due from a transaction. I think that over the last couple of years there's been increased scepticism and vigilance over instances of potential under-statement with respect to real estate values.

"The Treasury has been looking at these issues closely, and because of the less than scientific way of doing this [valuing real estate deals] it becomes a judgment call in a lot of instances. We do have some discrepancies from time to time. We try to work those out and ensure, at the end of the day, there's a fair value assessed."

Mr Turnquest added that the reforms to the Central Bank's processes, announced by its governor, John Rolle, via Friday's Tribune Business will also "go a long way to reducing the red tape and delays experienced by real estate transactions".