By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government has admitted to losing around 50 percent of due Customs revenues from inefficiencies in a system it is working feverishly to reform by eliminating manual processes.

The confession is contained in the government's own just-published review of The Bahamas' progress in meeting the United Nations' (UN) Sustainable Development Goals, with the report's release timed to coincide with Dr Hubert Minnis's visit to the New York-based body today.

The review, which has been obtained by Tribune Business, confirmed that half of due revenues collected through Customs were being lost due to system leakages, loopholes and fraud prior to efforts to modernise the system by introducing the Electronic Single Window (ESW) - a project said to be in the final stages of completion.

"The existing system was considered ineffective, due to over-reliance on manual procedures and outdated information systems," the government's report concedes. "These deficiencies were estimated to be costing the system around 50% percent of the revenues that a more efficient tax administration system would be able to collect."

Robert Myers, the Organisation for Responsible Governance's (ORG) principal, yesterday told Tribune Business that the government's estimate was in line with those produced by the private sector when he headed the Chamber of Commerce's Coalition for Responsible Taxation (CRT).

That body had projected the government was collecting just 45 percent of due Customs duties and real property tax prior to value-added tax's (VAT) introduction in early 2015, with the low collection rates resulting in an ever-increasing burden being placed on compliant taxpayers to contribute more.

"I think that's right from what I understand," Mr Myers said of the 50 percent Customs leakage rate. "Back in the CRT we said compliance on Customs duties and real property tax was 45 percent. That's pretty frigging atrocious.

"The modernisation of that, and going to the Electronic Single Window, will help considerably but when you're not collecting taxes from who you're supposed to be collecting them from, you have to charge other people more tax.

"If you don't make this thing compliant, and tax compliance is at 50 percent, you are having to charge the compliant ones 50 percent more than they should be paying. That's the problem. The law abiding taxpayers are paying double what they should be paying. That's the thorn in my side. The other 50 per cent aren't paying what they should be."

The Government's review, which will be submitted to the UN, also pledged reform and modernisation of the real property tax system - echoing its pledges in the 2018-2019 Budget.

Mr Myers yesterday called for the Government to end the exemptions that see Bahamian real estate owners in the Family Island, and those possessing undeveloped land in New Providence, not having to pay real property tax.

Arguing that the Government needed the broadest possible tax base, the ORG principal suggested such carve-outs were inequitable and had resulted in "land banking" that tied up large tracts that could be used for productive economic activity because there are no carrying costs.

"Some thought needs to be given to that also to start unlocking some of this land that could be used for development, increasing GDP and improving the Government's fiscal position," Mr Myers told Tribune Business.

"I'm a believer in the Out Islands. The people that build third and fourth homes, and are renting them, should be paying property tax. Those are businesses, so they should be paying property taxes.

"They may not pay the same rate as in Nassau, but they should not be getting a free ride given that the Government needs a broad base of tax. I'd prefer to see that ahead of the Government doing income or corporate tax. There's a lot for us Bahamians to consider. It's a 'me' problem, not a government problem. We've got to fix this thing otherwise we'll all go under together."

The Government's UN sustainable development goals review identified fiscal reform as critical to strengthening sustainable development, and mobilising domestic resources to achieve this.

"Good fiscal management is critical for economic growth," it acknowledged. "It is therefore important to have strong domestic resource mobilisation institutions and mechanisms, fiscal discipline through the development of strong monitoring tools such as budgeting and accountability processes, debt management, policy coherence and availability of high quality, timely and reliable disaggregated data."

However, the Government admitted that among the challenges was "some expected institutional resistance to organisational change" from within the public sector to the various financial and information management systems being implemented.

It also identified "project fatigue" as a concern, given that the $33 million Inter-American Development Bank (IDB) financed project to overhaul the public sector's financial management and performance monitoring will take place over five years.

Further challenges were the Government's ability to achieve "continued prudent fiscal management, from both the revenue and expenditure perspective, to mobilise significant resources for development in the face of vulnerability to external shocks" such as hurricanes.

Finally, the Government conceded there was "the absence of a co-ordinated framework to effectively co-ordinate and seek out international technical co-operation".