The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Total tax arrears due to the Government from three key revenue streams increased by 31 percent to $1.325bn during the nine months to end-March 2024, it was revealed yesterday.

Fiscal data disclosed that, despite the $112.4m revenue increase unveiled by the Prime Minister for the same period, VAT, real property tax and Business Licence fee arrears and associated penalties had risen by more than $300m during the first three quarters of the current 2023-2024 fiscal year.

The Davis administration further expanded the tax arrears owed to the Public Treasury by including the $357m it is demanding from the Grand Bahama Port Authority (GBPA) to cover the cost of providing government in Freeport over and above the tax revenue generated by the city - a move that takes the total to $1.682bn.

Philip Davis KC, unveiling the 2024-2025 Budget in the House of Assembly, said the latter figure does not include the $75m bill that the Government plans to issue to the GBPA for the upcoming fiscal year - a move that would raise the sum allegedly owed by Freeport’s quasi-governmental authority to $432m..

“The Government intends to invoice the Grand Bahama Port Authority for $75m as per the Hawksbill Creek Agreement,”the Budget document said yesterday. “This is not included in the fiscal year 2024-2025 revenue forecast.”

However, even if the GBPA’s purported reimbursement debt is excluded from the calculations, the growing mountain of tax arrears raises questions as to how effective the Government’s crackdown on delinquents, bill duckers and evaders has been to-date. “That arrears position should be going in the opposite direction if they are getting people to pay,” one source said.

Data drawn from the Department of Inland Revenue shows that VAT arrears have increased from $175.103m for the previous 2022-2023 fiscal year to $215.834m at end-March 2024, representing a rise of more than $40m or 23.3 percent. Business Licence fee arrears, though, were relatively flat year-over-year standing at $56.5m as at end-March 2024.

Yet total real property tax arrears, as disclosed by the Budget data, had jumped to $1.052bn as opposed to the $780m shown for fiscal year 2022-2023 - an increase of 34.9 percent or $270m. Outstanding commercial property taxes, in particular, were shown to have risen by more than $112m or 45.1 percent from $248.276m in 2022-2023 to $360.324m at end-March 2024.

Arrears due on foreign-owned vacant land jumped by 35.6 percent from $228.522m to $309.944m over the same period, while outstanding taxes owed on owner-occupied property rose by 35.2 percent from $140.577m to $190.107m. Finally, residential property tax arrears expanded by 17.9 percent to $192.521m at end-March from $163.078m in the 2022-2023 financial year.

It is likely these figures will be further reduced in the final three months, or fourth quarter, of the present 2023-2024 fiscal year that concludes at end-June. Meanwhile, more than 56 percent of the Government’s forecast $3.269bn in recurrent (fixed cost) spending for the upcoming 2024-2025 fiscal year its comprised of just three categories.

These are civil service wages, debt servicing (interest) costs, and subsidies to loss-making state-owned enterprises (SOEs). Interest payments on the Government’s existing debts are predicted to account for 20.1 percent, or just over one out of every five dollars of recurrent spending, at $676.724m - a near-$42m rise on the current year’s outlay.

This remains the second-largest line item in the Budget behind wages and salaries for public sector workers, and represents money that is being sucked away from public services such as health, education, social services, housing and national security to pay foreign and Bahamian holders of the country’s national debt.

As for civil service salaries, these are projected to hit $767.95m or 23.5 percent of total recurrent spending in the 2024-2025 fiscal year. This amounts to about a $23.5m year-over-year increase in the Government’s wage bill compared to the full-year forecast for 2023-2024. Subsidies are set to form another $412m or 12.6 percent of recurrent spending.

Combined, civil service wages, interest payments and subsidies total $1.857bn in recurrent spending. The Government is also forecasting a $9.5m year-over-year increase in total recurrent subventions to loss-making state-owned enterprises to $464.845m as compared to the $455.229m predicted for the current fiscal year.

Half the $465m will go to the Public Hospitals Authority (PHA), which is due to receive $232.455m over the 12 months to end-June 2025. Other major subsidy recipients are the National Health Insurance Authority at $46m; the Water & Sewerage Corporation with $36m; the University of The Bahamas at $36m; Bahamasair at $25m; and the Public Parks and Beaches Authority at $24m.