The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Chamber of Commerce's chairman yesterday gave his backing to the concept of adding real property tax to utility bills as a means of achieving "best practice" on compliance levels.

Michael Maura told Tribune Business it was "more than likely" that the Government would not have had to increase VAT to 12 percent if the Bahamas been in line with global tax collection and enforcement standards.

Real property tax is widely recognised as the Government's worst performing tax, with just 22 percent of full-year revenues for 2017-2018 collected by the mid-year Budget, leading the Minnis administration to mull creative collection methods that could boost compliance while also making it easier for taxpayers to pay.

"I think that's a positive step in the right direction," Mr Maura told Tribune Business of the idea to turn real property tax into a monthly payment - rather than a year-end lump sum - by attaching it to taxpayers' utility bills. "I believe it can bring a level of efficiency to government as well as improve the Government's effectiveness in tax collection.

"Governments have struggled with compliance, and they've struggled with identification. I think introducing a programme which brings greater transparency and monitoring should result in a more efficient tax collection process.

"We need government to be as effective and efficient a tax collector as possible," the Chamber chairman continued. "My assumption is that the better they are at assessing and collecting tax, the smaller the tax rate needs to be.

"If you don't have a portion of the tax not paid by persons circumventing the tax regime, you don't have to put that on the backs of people who are compliant."

Mr Maura thus joined Gowon Bowe, the Bahamas Institute of Chartered Accountants (BICA) president, in backing something that K P Turnquest, the Deputy Prime Minister, admitted is still at the "concept" stage.

"We are toying with the idea of creating an escrow payment scheme," Mr Turnquest 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."

Attaching real property tax payments to monthly utility bills would potentially relieve Bahamian middle class taxpayers from having to come up with a large lump-sum payment at year-end, enabling them to spread this over an entire year.

It could also potentially improve the Government's cash flow and ensure greater real property tax compliance, while also reducing the administrative and collection burden faced by the Department of Inland Revenue (DIR).

"The question is: Would the most recent increase in VAT have been 4.5 percentage points had we been collecting all our import duties, all our real property taxes?" Mr Maura asked. "That's the question.

"I would imagine if compliance was close to 100 per cent, or between 90-100 percent; I don't know what great compliance is internationally, but if we can get to best practices on tax collection and compliance - had we been at best practices - it's more than likely we would have been in the position of not having to increase VAT to 12 percent."

Mr Maura said improved compliance would provide a better foundation on which to base decisions over the structure of the Bahamas' future tax regime, given that accession to full World Trade Organisation (WTO) membership and reduced reliance on import duties looms on the horizon.

"There's a lot of planning and determination and work ahead of us as we consider what the tax regime will be, as we ponder WTO and how we amend Business Licence fees," the Chamber chairman told Tribune Business.

"There's still a lot of decisions that have to be made around the tax regime of the future. If we have a government that is effective and lives within the best practice bracket for tax compliance, tax assessment and performance, it would be fair to assume that will provide a better future tax regime."

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."