The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Up to 40 percent of real property tax bills never reach the intended taxpayer, the Auditor General’s Office revealed yesterday, as unpaid arrears breached the $600m mark.

The government’s financial watchdog, in a real property tax performance audit tabled in the House of Assembly, said more than one-third of tax bills were annually returned to their Department of Inland Revenue sender because they were mailed to “incorrect addresses”.

Failure to receive their bills, the Auditor General’s Office added, encouraged homeowners and businesses to believe they were relieved of their obligations to pay and thus resulted in “loss of revenue” that was contributing to massive real property tax arrears now exceeding an estimated $600m.

The report, which was submitted to Gaynell Rolle, the Department of Inland Revenue’s chief valuation officer, on December 14, 2020, also argued that the process of creating real property tax bills is too long as it takes two years for penalty surcharges for non-payment to be added.

“According to our review of the Bill creation process of the real property tax, we noted that it is lengthy,” the Auditor General’s Office found. “The length of time from bill creation to early discount to surcharges being added for non-payment is two years. The nature of the billing process contributes to taxpayer confusion and the accumulative arrears.

“The mode of issuing bills also needs to be revised as 30 percent to 40 percent of bills mailed are returned for incorrect addresses. However, homeowners that do not receive a bill must understand that the property tax is still due. When persons do not receive a bill, they think that they are not obligated to pay. Unpaid tax bills result in a loss of revenue.”

To address the situation, the Auditor General’s Office urged: “We recommend that the Department of Inland Revenue streamline the bill creation process to reduce the lengthy turnaround time. The mailing address issue should be resolved to reduce the large number of returned bills. Consideration should be given to using other mail delivery mediums, such as automated notification.”

The high cost of non-compliance was reinforced by the Auditor General’s audit of the Government’s accounts for the 2017-2018 fiscal year, the first in the Minnis administration’s five-year term in office. It revealed that real property tax arrears increased by a further $78.21m during those 12 months to end the year above $600m.

“The real property tax arrears at the end of fiscal year 2017-2018 amounted to $600.48m, an increase of $78.21m over the prior fiscal year,” the Auditor General’s report disclosed. “The prior year arrears and the surcharge for both fiscal periods, when combined, accounted for 92 percent and 90 percent of the cumulative taxes respectively.

“By law, if taxes are not paid by December 31 each year a 5 percent surcharge is applied. This surcharge increases the taxpayer arrears substantially. Efforts to increase the real property tax revenue collection, in all aspects, is deemed vital as in comparison to the tax arrears a minimal amount of revenue is collected annually.

“We recommend all the tools necessary to bolster the collection of real property tax revenue, and strengthen the efficiency and effectiveness of tax administration, be utilised.” Given that the Government is now in its 2020-2021 fiscal year, the amount of real property tax arrears will doubtless have increased.

Combining the two reports exposes just how the weaknesses, inefficiencies and slackness in real property tax enforcement and collection are threatening to cost both taxpayers and the country dearly. For starters, the $600m arrears represents monies that could have been used to fund vital public services and infrastructure upgrades that are presently being starved of cash and resources.

Besides the inequity created between those who consistently pay real property tax and those who duck their obligations, the reports also highlight how the imposition of new and/or increased taxes could have been avoided - or at least lessened - if all homeowners and businesses with the obligation to do so had paid their fair share.

The real property tax performance audit, which was designed to boost “value for money” for the Government and taxpayer by identifying opportunities to improve the process, said it was critical that homeowners and businesses “perceive that the process of property valuation is fair”.

“Persons are more inclined to pay their taxes when they are confident that everyone is paying their share, and it is done in a fair (equitable) and transparent manner. Also, ease of doing business in quick turnaround time enhances tax compliance administration efficiency,” the Auditor General’s Office said with deft understatement.

While giving the Government credit for its efforts to update the real property tax register via the $7m project undertaken by consultant Tyler Technologies, which aims to capture every building and piece of land on New Providence in a bid to generate an extra $21m in annual revenue, the report said perceptions of “fairness” were being undermined by a lengthy appeals process to challenge valuations.

While the Tax Appeal Commission has been given the authority of statute law, the Auditor General’s Office said the appeal process is being impacted by a lack of staffing and training, as well as a likely increase in cases.

Calling for the appeals process to be “streamlined” via automation, and timelines for the processing of complaints to ensure it “flows smoothly and efficiently”, the report added that COVID-19 had delayed the completion of Tyler Technologies’ project beyond the June 2020 target.

“The lockdowns and curfews have affected Tyler Technologies ability to complete the property revaluation process that should have been completed by June 2020,” the Auditor General’s Office said. “The delay in the revaluation process directly impacts the informal appeal of revaluations that should have occurred between July to November 2020.”

It called for real property tax payment plans to be automated rather than stick with the current process where such arrangements can only be authorised by the chief valuation officer. “This process impedes the timely collectability of revenue and the taxpayer’s user experience is hindered,” the report said. “Also, the payment plan is not automated for timely payment, tracking and accountability.”

The Auditor General’s Office urged the Government to follow up on previous recommendations to use utility bills, the Bahamas National Geographic Information System (BNGIS) and land use plans to help update billing and property records.

However, it noted that the statutory Geospatial Advisory Council “has not met in over five years” with government agencies and departments continuing to operate in silos that prevent data sharing.