The Tribune

• Top official: Those 2,700 ‘substantially under-valued’

• 10,000 commercial properties had evaded tax roll

• Real estate chief says receiving ‘lot of complaints’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Ministry of Finance’s top official yesterday asserted that just 3 percent of New Providence homeowners will suffer a real property tax hike this year, adding: “We chose not to be punitive.”

Simon Wilson, the financial secretary, told Tribune Business that increased real property tax billings are not as “widespread” as feared with only 2,700 out of 80,000 taxable residences having to brace for higher payments because their real estate assets were previously “substantially under-valued”.

And some 2,400 homeowners will see a reduction in their real property tax bills for 2022, he added, with “most persons” encountering no change in the amount due to the Department of Inland Revenue (DIR) and Public Treasury.

Disclosing that the recent New Providence-wide valuation exercise had added 10,000 commercial properties, which had previously been paying zero, to the real property tax roll, Mr Wilson said the struggles of many households and businesses to recover from COVID-19’s economic devastation had been “a major consideration” for the Government when calculating this year’s billing.

Although the Real Property Tax Act enables the Government to levy retroactive taxes going back ten years on properties that were never declared by their owners, and thus escaped being billed, the financial secretary added that the Ministry of Finance had chosen not to collect back taxes - even from high-end homeowners and businesses - who fell into this category.

Responding to a Tribune Business article, which revealed that homeowners and commercial property owners/landlords were “absolutely livid” over receiving real property tax bills that had doubled or tripled in size year-over-year, Mr Wilson said: “We have approximately 80,000 homes in New Providence. Of that 80,000, only 2,700 saw an increase in their bill.

“And 2,400 saw a decrease in their bill. If you look at those numbers overall, you would realise that most persons will not see an increase in their bills. Some will see an increase, and if they see an increase it will be those persons whose homes were substantially under-valued in the real property tax system.”

Based on the financial secretary’s figures, just 3.4 percent of taxable New Providence residential properties will suffer an increased real property tax burden in 2022. This is an even lower percentage than that cited by Senator Michael Halkitis, minister of economic affairs, in a newspaper article yesterday where he said only 30 percent of owner-occupied homes will see a rise.

However, David Morley, Morley Realty’s principal, told this newspaper yesterday he would “challenge” the minister’s assertion that 70 percent of owner-occupied properties will see no tax increase based on the nature and volume of complaints he was receiving regarding 2022 billings.

Christine Wallace-Whitfield, the Bahamas Real Estate Association’s (BREA) president, told Tribune Business the industry group and its members have already received multiple complaints over 2022 real property tax billings that commercial landlords allege have increased by anywhere from 184 percent to 330 percent.

In particular, she questioned whether the New Providence-wide assessment conducted by Tyler Technologies on the Government’s behalf had checked the valuations produced with BREA member realtors to see if they matched and were accurate.

“We’ve absolutely had a lot of complaints and a lot of e-mails expressing concern over the increases,” Mrs Wallace-Whitfield said. “It is concerning and it was a little bit of a surprise to a lot of people. Anything like this starts to cause people to rethink investments and purchases....

“I’ve seen anywhere from 50-70 percent increases, and I think that’s been mild. I’d like to ask more questions and find out more as to why there’s been an increase and find out what the Government’s plan is moving forward.

“Everything has to do with appraisal value, market value. The main thing I’d like to know is did they cross-reference and check with Bahamian-licensed, trained appraisers? That’s very important. We are the ones that know the land, know the market.”

Mrs Wallace-Whitfield said the real property tax increase was coming when many persons were “trying to recuperate and get up on their feet” after COVID-19. She added that the issue will be discussed by BREA’s Board later this week.

Andrew O’Brien, attorney and partner at the Glinton, Sweeting & O’Brien law firm, told Tribune Business that its lawyers were “definitely” fielding complaints about real property tax hikes from clients. “This is becoming an issue now,” he added. “I would think that as people see their bills and payment time approaching, the volume of complaints is going to increase.

“From people who have already seen an increase they are asking: What can I do? I think a lot of people want to object, and I suspect some people are weighing their options.”

Mr O’Brien encouraged the DIR to be flexible on the time given to taxpayers to file objections to their billings and valuations as a result of COVID. The Act requires such challenges to be filed “within 30 days” of when the notice requiring payment “is deemed to be served”.

However, Mr Wilson said the Bahamian economy’s current post-COVID weakness was a major influence on 2022 real property tax billings - particularly the potential disruption that a massive “one-shot” increase would cause to already-struggling homes and businesses.

“That was a major consideration,” he told Tribune Business. “We were very careful in our determination of making these adjustments. We went back to those numbers many times, and we did a number of scenarios.

“We were very sensitive to homeowners. We didn’t go back and do back taxes. The Act allows us to go back up to ten years in levying taxes. In many cases, people with high value homes on the register that were not there before, we didn’t go back and tax them. There were no retroactive adjustments. It was all on a go forward basis.”

As for New Providence-based commercial properties, Mr Wilson added: “We took the same approach again, nothing retroactive. In some cases with commercial properties, we were disappointed to discover in this exercise that close to 10,000 commercial properties were not on the tax roll before.

“That was a disappointment, but we chose not to be punitive in our approach. There was no retroactive adjustments in tax. In many cases our valuations tend to be on the lower, conservative side. We tried to be consistent in our approach and process, and it’s on a going forward basis.”

Mr Wilson said the New Providence-wide mapping exercise conducted by Tyler Technologies, which photographed every residential and commercial property on the island, will provide the DIR with a “complete database” of all real property tax-eligible properties.

This, he added, will enable the tax collection agency to deal with queries, valuation challenges and other disputes “more efficiently” and quickly than in the past, while also providing a tool through which to implement tougher compliance and enforcement measures.

And the revaluation assessment which accompanied the mapping has provided the Government with a mechanism for “doing adjustments in the future” based on one, standard methodology that can be employed for all properties, the financial secretary added.

Mr Wilson hailed Tyler Technologies’ work, and the benefits flowing from it, as “obviously a big first step” towards modernising Bahamian real property tax and making its administration more efficient, while also establishing a more just and equitable system where all pay their fair share.

“Obviously more has to be done in the Family Islands,” he told this newspaper, “and we anticipate doing reassessments on a sustained basis. We are more prepared to do that than ever, but this is a big first step.”

Mr Wilson described the $450m revenue increase over five years, outlined by Mr Halkitis, as “the potential run rate”. He added: “It takes work. We have a compliance rate that is very low. The reassessment was the first step.

“The work has to be done to improve the ease of payment, compliance and enforcement, and educating the taxpayer so that they understand paying property taxes pays for government services. The next step will be education and awareness, and hopefully that will encourage more people to pay.”

Mr Wilson reaffirmed that increasing real property tax collections was “very, very important” to the Government’s efforts to avert a fiscal crisis by, in particular, raising the recurrent revenue-to-GDP ratio to 25 percent from the present 18.2 percent by the time the Davis administration’s five-year term in office ends.

“The target we have for real property tax is 3.5 percent of GDP,” he added. That compares to the present 1 percent of GDP, meaning that real property tax will account for close to one-seventh of the 25 percent revenue-to-GDP target.

The 3.5 percent, or near-$400m, goal would near-triple the $158.814m that the Government anticipates collecting in real property taxes during the current 2021-2022 fiscal year. Increases to $181.142m and $218.3m are forecast for 2022-2023 and 2023-2024, respectively, but the latter is still almost 50 percent below the level targeted.

Mr Wilson, meanwhile, urged residential and commercial property owners to contact the DIR with any concerns over their tax billing or valuation. “This is an exercise,” he added. “Nothing is perfect, although we believe this is largely correct.

“The same applies to ability to pay. The Act has a mechanism to assist persons who may have a genuine challenge with making payment. It’s not meant to be punitive. We want to collect taxes owed, but if persons cannot pay and have a bona fide reason, they should come into the Department and have a discussion.”