By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas needs a modern Land Registry and house price index if the Government is to properly capture changing real estate market dynamics for real property tax purposes, the Chamber’s chairman said yesterday.

Gowon Bowe told Tribune Business that while these were “future” objectives that will not be realised in the short-term, the Government needed a better system for accurately assessing property valuations.

He acknowledged that the Ministry of Finance’s recently-launched crackdown on real property and other tax defaulters would “cause consternation” for some, but in the tax compliant society that the Bahamas needs to become, such persons can no longer enjoy “a free ride”.

Mr Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC), backed the Ministry’s drive, through the Department of Inland Revenue, to tackle abuses that have resulted in more than $500 million worth of due real property taxes going uncollected.

In particular, he said the Government was targeting properties that classified as residential, but which may have been converted into commercial use - such as shops and duplexes/rental income properties.

While no tax is paid on the first $250,000 of a residential property’s valuation, a 1 per cent rate is levied on its commercial counterparts - meaning that such ‘converted’ properties may have been under-paying their tax liabilities for years.

Mr Bowe said the “integrity” of the Government’s real property tax system had often been breached, due to its failure to conduct timely valuations and assessments of properties on the tax roll.

He used the example of a single storey residence that may have last been assessed 10 years ago, but which had added another floor since, and therefore should have been paying more taxes based on the ‘value added’.

“Those properties in the past have been able to shuffle through without assessments being made,” Mr Bowe told Tribune Business, adding that the Government’s systems were previously “not aware of changes to property dynamics”.

While the Real Property Tax Act requires owners, both residential and commercial, to submit an annual declaration on their property’s market value and whether they have made any improvements to it, this legal requirement has not been enforced in practice.

Mr Bowe acknowledged that “no one is going to run to the Government” to inform them of an increase to their property’s value, given that this would inevitably result in a tax bill increase.

“It’s therefore upon the Government to have systems in place to capture that,” Mr Bowe told Tribune Business.

The Government has sought to use technology to improve the recording and analysis of real property tax data, having contracted Tyler Technologies to conduct proper mapping of New Providence and its various communities.

However, while agreeing that they were “things for the future”, Mr Bowe said a fully-functioning Land Registry and house price index “would actually make this exercise more efficient, more timely and less impactful”.

A Land Registry would enable the Government to capture, record and analyse real time data on all taxable properties, while a house price index would assist valuations/assessments by factoring in real estate prices and related inflation.

Real property tax compliance rates have been estimated at just 40 per cent, given that many defaulters have long believed there are no consequences for not paying.

The Auditor-General said an “exorbitant” $541.886 million in real property taxes were outstanding as long ago as 2010-2011, when almost $95 million in real property taxes went uncollected.

And the Government failed to collect almost $108 million in due real property taxes during the 2011-2012 Budget period, a sum equivalent to almost 25 per cent of that year’s fiscal deficit.

Unveiling its real property tax crackdown, the Ministry of Finance said: “Analysis of real property tax assessments reveals that a substantial number of property owners in the Bahamas are under-paying their true tax liability, either because the valuations are out of date, the properties are misclassified, or they are unregistered entirely.

“In the very near future, the Ministry will courier communications to 5,000 property owners, requesting payment of their additional property tax assessments together with their regular tax bill. These properties are in higher value or upper middle class communities. The value of these properties will be re-assessed, if they were not assessed, during the last five years.

“In the coming weeks, another r ound of notifications will be issued to owners of properties that are either not registered for property tax, or misclassified. An example of a misclassification is a business property (a store) that is classified as residential.”

The Ministry pledged that the Inland Revenue Department would work with targeted taxpayers whose homes had been impacted by Hurricane Matthew.