The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A top accountant has praised the government's "innovative thinking" in seeking to collect real property tax through attaching it to the monthly payment of utility bills.

Gowon Bowe, the Bahamas Institute of Chartered Accountants (BICA) president, told Tribune Business that he was "definitely in favour" of a concept that was floated by the deputy prime minister last week.

KP Turnquest used the example of adding real property tax to electricity bills during an address to the Rotary Club of Old Fort, suggesting this would boost compliance and the government's revenues while also relieving taxpayers of the burden of coming up with a large annual lump sum payment.

Speaking subsequently to Tribune Business, the deputy prime minister described the proposal as "a work in progress" that needed to be firmed up with legislative and administrative changes should the government decide to go this route.

While nothing was fixed, Mr Turnquest confirmed it was an idea the Minnis administration is "toying with" as it aims to boost real property tax compliance levels that are currently thought to lie below 50 percent. Just 22 percent, or around one-fifth, of full-year real property tax revenues for 2017-2018 had been collected by the mid-year Budget.

"We are toying with the idea of creating an escrow payment scheme," he told Tribune Business. "It depends on how we structure it. It's something we'll have to sit with our team and determine what is the best mechanism to make it work.

"It's something that works with insurance and the bank, and can be along similar lines. It's a work in progress. It's too early to give details as to how it works or what the mechanism may be. It's concept at the moment."

Mr Turnquest said his reference to electricity bills at the Rotary Club of Old Fort was "just one way that something could be done", and expressed annoyance that media coverage had suggested such a plan was already in the works.

"I'm surprised they haven't called for my head," he joked, emphasising that the Government's thinking was to create a monthly real property tax payment plan "so at the end of the year people do not have to worry about coming up with that big number".

Mr Bowe, while applauding an idea that has taken root in the US and UK, said the necessary collection, tracking and auditing systems needed to be put in place to ensure the Government received all due revenues.

He added that such collection methods should not be confined to state-owned enterprises (SOEs), with private utility providers such as Cable Bahamas and the Bahamas Telecommunications Company (BTC) also candidates to implement this scheme.

"I think any type of system that proactively allows for payments to take place over a period of time, with a tracking and monitoring process, is advantageous," Mr Bowe told Tribune Business.

"There are a number of situations in the UK and US where monies are taken from other bills and set aside. It's not uncommon and not unusual. It's all around the processes and systems: Am I comfortable that a Bahamas Power & Light (BPL), a Water & Sewerage Corporation that has a monthly billing process has the ability to collect it properly, put it in a fiduciary/escrow account, and have the collection audited and monitor it?"

Mr Bowe said these issues "are not obstacles; they're just matters that we need to make sure we diligently address". He added that more frequent, lower real property tax payments would likely help middle class Bahamians meet due obligations they currently find difficulty accounting for as four or five-figure lump sums.

"Any system that allows for more frequent payments, and doesn't lead to bit payouts and big payments at the end, is beneficial," the BICA president said. "A lot of people are living on monthly budgets, and these large elements are things they sometimes struggle with because they have not planned for it on a monthly basis.

"I think it's an innovative idea. I'm definitely in favour of it. It just needs to put the pieces together and understand how it can be done, so it's auditable and can be tracked in the appropriate manner. That's something I would definitely favour for any household obligation to the Government.

"There are so many examples of taxes being paid monthly to defer the impact of fixed obligations, so looking to replicate that concept is certainly a positive consideration." Mr Bowe pointed to the UK's pay-as-you earn (PAYE) and withholding taxes on interest payments as just such examples.

The BICA president, though, warned against limiting collection of real property tax just to bills issued by SOEs such as BPL. "We should be looking at any utility and formulating an agency-type relationship for collection of tax," he told Tribune Business. "It shouldn't rely on government owning an entity to do so. It should be a mechanism of collection fee arrangements appropriate for any entity."

The Government had collected $88.942 million, or 62 percent, of its full-year $143.4 million real property tax revenue target for 2017-2018 with three months left in the period. It is aiming to collect $132.189 million this fiscal year, and Mr Turnquest said he was seeking to beat 2017-2018 performance without increasing rates.

"We know that we have significant slippage in real property tax," the Deputy Prime Minister told Tribune Business. "To the extent there is government revenue sitting out there it has as an effect on the ability of government to meet its financial commitments.

"We are going to do all we can to ensure we have compliance and collect what's outstanding. We are doing reviews on all our systems to determine whether the current data software is adequate, whether it's efficient and allows us to make assessments and issue billings effectively, and the overall process for billings and assessments.

"We expect to make some changes, further improvements this year. Our goal is to drive revenue yields above last year without making any significant change to the rates, and we'll see how that works."