The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

The deputy prime minister yesterday warned tax cheats “who have been taking advantage of our inefficiencies” that they are a prime government target in the 2019-2020 fiscal year.

KP Turnquest, pictured, put fraudsters and evaders on notice as he unveiled the government’s ambition to add “as many as 9,000 unregistered properties” to the real property tax roll during the upcoming door-to-door assessment that will begin next month on New Providence.

Pledging a further compliance crackdown to ensure the government maximises its revenue yields, Mr Turnquest said during the budget communication: “It is well known that there is leakage in government tax revenue as a result of inefficiencies, alongside weak controls against fraud and corruption.

“It is our view that everyone should pay their fair share, and that means we are putting taxpayers on notice who have been taking advantage of our inefficiencies to cheat and circumvent the system and avoid paying their fair share.”

He explained that the real property tax initiative represented an effort to “revamp the existing antiquated system” by equipping the government with sufficient data to update the real property tax register.

“The first phase of this project is expected to add as many as 9,000 unregistered properties to the tax roll,” Mr Turnquest added. “It will bring fairness and transparency to the property valuation process by establishing objective, local and internationally accepted measurements that are critical for property tax assessments.

“Eventually, there will be a public, online database of property values for tax purposes. The net result of this enforcement exercise is an anticipated annual boost of $21m in real property tax collections.”

The deputy prime minister added that the Government’s Revenue Enhancement Unit, which will be fully operational come July 1, had already generated $15m “incremental revenue” by providing “a new set of algorithms to update property values in high valued neighborhoods” and initiating collection activities.

Unveiling other real estate-related initiatives to be implemented in the upcoming fiscal year, Mr Turnquest said the cap on real property tax will be raised from $50,000 to $60,000 for high-end owner-occupied properties from July 1.

And the real estate transaction tax, while retaining the existing 2.5 percent and ten percent rates, will be changed from stamp tax to VAT from the same date. He added that the government is also amending the law to “plug the loophole” that allowed previously companies to treat VAT as a business expense and input, and either net it off or claim it back.

This occurred when the real estate transaction tax was split 7.5/2.5 between stamp tax and VAT, and Mr Turnquest said it could not have been the law’s intent for VAT on commercial transactions to be reclaimed when residential deals did not enjoy similar treatment.

The deputy prime minister added that the switch to VAT from stamp duty had also been necessitated by the removal of so-called “ring fencing”, or preferential tax breaks for foreign investors and non-resident entities, in the laws that brought The Bahamas into compliance with European Union (EU) and Organisation for Economic Co-Operation and Development (OECD) demands.

Marlon Johnson, the Ministry of Finance’s acting financial secretary, told Tribune Business that the newly-created “level playing field” for domestic and non-resident entities would have required The Bahamas to levy Stamp Tax on foreign real estate transactions involving Bahamian-domiciled entities.

Explaining that this was not the government’s intent, he said the switch to VAT would eliminate this possibility because the VAT Act stipulates that tax can only be levied on goods and services used, consumed or benefiting somebody in The Bahamas thereby eliminating any extra-territorial effect.