The Tribune

• Bahamians ‘preparing for’ exemption end

• But preparation ‘frustrating’ property sales

• Chamber chief: ‘Don’t do it in one swallow’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Family Islands are bracing for the “inevitability” of real property tax being levied on Bahamian owners, it was revealed yesterday, amid “frustration” that preparations for such a move are holding up real estate sales.

Daphne Degregory-Miaoulis, Abaco’s Chamber of Commerce president, told Tribune Business that she and other residents were “preparing” for an imminent end to the decades-long waiver that has exempted all Bahamian-owned property in the Family Islands from paying this tax.

She explained that this was based on the Government’s requirement that all Family Island land parcels and properties register for real property tax purposes and obtain an assessment number. Unless they do so, real estate sales that are in process will have their closing delayed because the transaction will not be stamped for VAT payment purposes, or recorded in the Registry of Records, without the relevant assessment number.

Suggesting that the Government would not go to such lengths unless they planned to extend real property tax to all Family Island real estate, not just that owned by foreigners, Mrs Degregory-Miaoulis told this newspaper: “I’m sure they are inevitably coming to the Family Islands because of the emphasis that they’re putting on all properties having an assessment number and becoming registered.

“I can see this happening in New Providence, where you have the tax structure in place, but why are you holding up real estate sales and the processing of Business Licences for the sake of businesses having tax numbers and properties having assessment numbers?

“They’re not going through this exercise for nothing. They obviously have in the back of their minds to start taxing. Why else would they be putting all this energy and time into the Department of Inland Revenue having to do all this additional work and frustrating real estate transactions?,” she continued.

“We can’t close the sale of property unless we give an assessment number, even Bahamian to Bahamian deals. We can’t get real estate transactions closed. It’s frustrating people. I’m surprised we’ve not had more people pulling out of transactions because of the length of time it’s taking.”

The Government has made no formal announcement that it plans to extend the application of real property tax to Bahamian-owned property in the Family Islands, but there is every sign that it may be about to do so. Tribune Business reported earlier this year that Family Island property owners have been receiving real property tax bills and assessment numbers, albeit a zero balance was shown as owing because the levy has not come into effect.

The Government is presently extending the Tyler Technologies valuation and mapping exercise - previously conducted on New Providence - to other Bahamian islands. And its recently-released Fiscal Strategy Report projects that real property tax revenues will more than triple to $555m within four years, growing by 227 percent in four years from the present $169.4m forecast to $554.5m.

No comprehensive road map for getting to the latter target has yet been unveiled, but one option would be to eliminate the multiple care-outs and waivers that presently exempt Bahamian-owned land in the Family Island from paying real property tax as well as locally-owned vacant land in New Providence. Foreign-owned property in the Family Islands is already subject to real property tax.

Eliminating the exemptions would likely create mixed effects. Given that the threshold below which no real property tax is paid was raised to $300,000 in last May’s Budget, many Family Islanders will likely still pay zero even if it is imposed. And its introduction could force Bahamian landowners, who have sat on their Family Island holdings for years because there are no carrying costs, to finally use them for productive economic development purposes.

Meanwhile, revealing that she has experienced first-hand the difficulties in obtaining real property tax assessment numbers in her role as a realtor, Mrs Degregory-Miaoulis said if the Government had no intention of imposing the tax then it would have allowed Family Island residents and their attorneys more time to comply.

“They haven’t done that by giving us notice,” she said. “They are saying we need it [the assessment number] now, and are going to hold up whatever transaction you have going on until we get it. We are not being taxed at the moment, but are preparing for it. In the meantime, they’re holding up taxes they could be collecting by delaying transactions.”

Mrs Degregory-Miaoulis said Abaco residents were being given “no consideration” when it came to supplying the conveyances and other necessary documents to obtain real property tax assessment numbers, given that such papers had often been lost or destroyed during Hurricane Dorian’s devastation.

“The attorneys are trying to get the assessment number, I’m trying to get the assessment number. You have to go through the real property tax portal to register your property. You can’t go to the office; they will turn you away,” Mrs Degregory-Miaoulis said. “You get a reference number, but that doesn’t really help you because when you call them up you have to give them the name.

“I know it first-hand. I’ve had to go through the situation myself. Why hold and frustrate sales at a time when you are not taxing but preparing to tax? Just collect the VAT you are entitled to at this point and give at least a year’s notice of having to register our properties. To me that’s the logical thing to do. It doesn’t block funds coming to the Treasury, and doesn’t block people from being able to get transactions to close.

“They’re putting far too much stress on the Department of Inland Revenue because they’re taking forever to get the Business Licences issued, and taking forever and a day to get assessment numbers issued. Having to do it all in one swallow just causes confusion and frustration for everyone. Unless they want to frustrate themselves and the whole financial system there’s no logical reason for them to do this when planning to tax.”

The Family Islands may not be the only part of The Bahamas where real property tax is extended to. Assessment numbers are now also being required for vacant Bahamian-owned land in New Providence, while one Freeport-based contact, speaking on condition of anonymity, said they were informed on a recent visit to the Department of Inland Revenue that they may as well register because real property tax is “coming soon” to the city.

While Freeport has traditionally enjoyed a real property tax exemption under the Hawksbill Creek Agreement, the source suggested this waiver may now have expired and not been renewed, therefore depriving the city’s businesses and residents of any protection. Introducing the tax in Freeport, they added, will place “a real damper” on the city’s resurgent real estate market that has been driven by sales to US and Canadian buyers.

Richard Lightbourn, the former MP and now a consultant at the McKinney, Bancroft & Hughes law firm, confirmed yesterday that real estate transactions will not be stamped or recorded without a real property tax assessment number. And extending real property tax to Bahamian-owned real estate in the Family Islands, he added, will come with its own challenges given the numerous title/ownership disputes that exist as well as the prevalence of generational land.

“Any transaction involving property you have to have the assessment number on the heading of the document, otherwise they won’t stamp or record it. It’s holding things up a bit. Obviously they’re snowed under,” Mr Lightbourn said. “There are now a number of transactions that are not taxable waiting for assessment numbers.”

As for the likelihood real property tax will be extended to Bahamian-owned real estate, he added: “I don’t think they’ll go through this exercise without having that in mind. I know there’s a lot of property owned by foreigners that has never been registered, and should have been paying tax for a little while.

“I think the ultimate goal is to tax all property, but it doesn’t address the issue of good title. There’s so many properties throughout the Family Islands with questionable title and there is also so much generational property.”

Suggesting that The Bahamas should finally to the system of registered land it has been discussing for decades, Mr Lightbourn said unless title issues were addressed some Bahamians could ultimately be billed for - and pay - real property tax on real estate that they do not own.