The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Tax arrears owed to the Government under some of its most important revenue streams grew by $382m or 26.7 percent during the first nine months of the current fiscal year to hit $1.812bn at end-March 2026, Budget documents released yesterday revealed.

The increase from $1.43bn at end-June 2025 was worsened by the inclusion of the $99.228m bill issued to the Grand Bahama Port Authority (GBPA), as the Government renewed its bid to seek reimbursement from Freeport’s quasi-governmental authority for public services it has provided in the Port area, and recover costs that exceed tax revenues generated by the city.

Stripping out that bill reduces the combined arrears increase for VAT, real property taxes and Business Licence fees to $283m for the first three-quarters of the present fiscal year. While the figures represent a one-time snapshot, and could have been significantly reduced over the past two months, they make a case for the Davis administration’s continued focus on heightened enforcement, compliance and administration as opposed to introducing new and/or increased taxes.

VAT arrears, representing past due and owing taxes, suffered the biggest increase in jumping by 33.6 percent in the nine months since the 2024-2025 fiscal year ended. They rose by more than $103m, increasing from $309.24m at end-June 2025 to $413m as at the close of March 2026.

Not far behind was commercial real property tax arrears, which were shown to have increased over the same nine-month period by 31.2 percent - from $341.331m at end-June 2025 to $447.899m at the end of March this year. Outstanding and past due real property taxes on foreign-owned vacant land also surged by a similar amount, increasing by 33.8 percent from $307.174m to $411.077m, thereby expanding by more than $103m.

However, the data from other real property tax categories suggests the Government’s compliance efforts may be enjoying some success. Residential property arrears increased by less than $5m, or just 2.4 percent, during the nine months to end-March as they rose from $202.394m at end-June 2025 to hit $207.263m.

And owner-occupied real property tax arrears were slashed by more than $38m in just nine months, falling by 18.3 percent from $208.549m at end-June 2025 to $170.4m at the close of March 2026. Business Licence fee arrears, too, had only increased by less than $2m over the same period to $63.019m at end-March 2026, and both this levy and real property taxes were at the year’s traditional payment peak when the data was taken - meaning the outstanding balances could have been sharply reduced.

Tribune Business sources, speaking on condition of anonymity, yesterday revealed the Government’s demand letter for the $99m-plus was received by the GBPA just days before the May 12 general election. They suggested that battle between the two sides will likely recommence in earnest once the 2026-2027 Budget process is completed next month, following the arbitration ruling earlier this year, but suggested collecting on the $99m will not be as simple as the Government appeared to suggest yesterday.

Michael Halkitis, minister of finance, cited the GBPA case as an example of the action the Davis administration is taking to recover revenues due and owing to the Bahamian people. He reiterated: “Where obligations exist, they must be honoured. And where revenue is due, it will be collected.”

Expanding on this theme, he told the House of Assembly: “We are also taking firm action to recover revenues due to the Bahamian people. Following the recent arbitration between the Government and the Grand Bahama Port Authority, the Tribunal confirmed that the Government’s cost recovery rights remain fully enforceable.

“Accordingly, the Government has formally invoked its review rights and issued a demand for reimbursement of administrative costs incurred in the Port Area.The administrative cost demanded has been independently assessed and reflect the legitimate cost of services provided by the Government.”

However, one well-placed source, speaking on condition of anonymity, voiced scepticism over whether the Davis administration will be able to collect on the $99m bill during the 2026-2027 Budget year - an outcome that could throw its fiscal projections out of whack. “That pre-supposes they will get a determination on this $99m done this fiscal year,” they added.

The three-person arbitration panel determined that the “the Government can invoke the review for future years” over whether it should be reimbursed for the cost of providing public services in Freeport that exceeds tax revenues generated by the city. However, the source said it was still “unclear” - despite the ruling - how the Government and GBPA determine if a shortfall exists, how much is payable to the former and what mechanism and formulas are employed to resolve this.

This was not resolved by the arbitrators, and the source also pointed out that the Government appeared to be using the same original Hawksbill Creek Agreement mechanism for calculating the GBPA’s purported liabilities to come up with the $99m bill even though the panel ruled this had been replaced by the 1994 agreement that committed the quasi-governmental authority to pay $500,000 per annum over five years.

With much left to resolve, the source suggested that the Government will be hard-pressed to collect on its $99m GBPA demand during a 2026-2027 fiscal period that closes on June 30 next year.

Elsewhere, the Budget documents showed a much-reduced $183.75m worth of borrowing that the Government plans to guarantee on behalf of state-owned enterprises (SOEs) during the upcoming fiscal year. Some $90m, or almost half this sum, relates to the loan taken out by the Bridge Authority to finance the replacement of the Glass Window Bridge in Eleuthera, while a further $84m involves the Bahamas Mortgage Corporation and $9.75m is for the Education Loan Authority.

There is also $70m described as “on lending” to the Public Hospitals Authority (PHA).