Monday, December 7, 2020
EDITOR, The Tribune.
I am, among other things, a real estate attorney. As such I work with realtors every day. Like many realtors,
I make money from high end property sales involving mostly foreigners.
Like them, I understand (although I do not overstate) the role that the high end real estate market plays in our economy.
Nor do I not fault realtors their right (like everyone else’s) to speak collectively to their economic interests.
But when a group of realtors tells you that the IMF is too left leaning in its approach to taxation on luxury properties, it is time to consider whether short-sighted and narrow self-interest is getting the better of objective judgment, common sense and patriotism.
The economic arguments in favour of low taxes on luxury property are senseless in the extreme.
Firstly, nobody comes to The Bahamas to buy property because it is cheap.
Nothing in The Bahamas is cheap, and luxury properties are certainly no exception.
By what logic should the taxes on an inherently expensive (hence ‘luxury’) item be concessionary?
Secondly, Americans, Canadians and Europeans are quite accustomed to high (and strongly enforced) property taxes on high end real estate.
In my practice, I am frequently pestered by Canadian clients who are unable to get prompt tax bills sent out and fear (wrongly, as it is) that their property will be seized for non-payment.
Because of a lack of enforcement, there are at present hundreds of foreign owned luxury properties around The Bahamas with delinquent tax bills which are effectively frozen out of the market because the owner adds the cost of the outstanding tax to their asking price, alienating them both from potential buyers and from tax income.
In any sane jurisdiction (like those most buyers call home) these properties would be seized and sold for tax to new buyers, keeping the luxury property market energised and taxes coming in.
Now any student of Bahamian history knows that our elites have traditionally been masters of self-harming economic illogic (like the retailers who fight tooth and nail against higher wages, which will end up in the pockets of their customers and ultimately themselves).
But even if there was some short term economic benefit to low taxes on luxury real estate, such benefit would only accrue to a narrow segment of the population – people like myself and high end realtors.
Meanwhile, the cost of running this country would continue to be disproportionately placed upon the poor, who ultimately pay for discounted taxes on wealth and property.
The Bahamas today is a place where taxes on consumption (which, by definition, affect the poor disproportionately) are high and rising, while taxes on income are non-existent and taxes on luxury property are absurdly low and unenforced.
The result is one of the most unequal societies in our region, while spending (contrary to a widespread misperception) is pitifully low by comparison to our wealth.
This is the root cause of crime and every other social emergency that we face.
Economically, it is both unsustainable and utterly senseless. Even the IMF can see that.
ANDREW ALLEN
Nassau,
December 5, 2020.
Comments
Porcupine says...
Exactly right!
Posted 7 December 2020, 7:26 p.m. Suggest removal
C2B says...
Agree. You only have to announce a change in the enforcement laws and the outstanding amounts will flood in. Also, the interest on outstanding taxes and penalties should be more than what the Government pays to finance their delinquency. 15% sounds good.
Posted 8 December 2020, 10:36 a.m. Suggest removal
FrustratedBusinessman says...
I agreed with most of what you wrote here, we really need to ramp up tax enforcement. It is the same thing with BPL, we will never be able to have affordable light bills when certain people are privileged (I hate using that word) enough not to be required to pay their bills. The Bahamas as a whole needs a massive accountability and transparency overhaul, for far too long there has been one system of life for certain people, and another for the common folk.
"The result is one of the most unequal societies in our region"
I disagree with you entirely on this point. A lot of the supposed "inequality" here is due to the fact that we have a very high concentration of foreign expats that own extremely high value properties/other assets. Ever with the '08 Recession and Dorian + COVID in recent times, we are far ahead of nations such as Haiti, Jamaica, or even somewhere like T&T. The Bahamas has been in a gifted economic position for a very long time, relative to other nations in our region excluding the US, we just have had piss poor leadership for a large portion of the post-Independence era thus ruining our national development.
I will never support an income tax either.
1.) You will run large amounts of foreign investment out of the country (depending on how you set the rates/brackets
2.) We know that it will not be conducted fairly. As with everything else here, certain people will have to pay while others don't. As sometimes happens even in developed countries such as the US, it will no doubt be used for political/business targeting as well.
An income tax is just a horrible idea for the Bahamas no matter what. The rest of your article is spot on though.
Posted 8 December 2020, 2:57 p.m. Suggest removal
skeptic says...
Andrew Allen here, hello.
WHAT ON EARTH does an income tax have to do with foreign investors???????????
By definition, income taxes apply to wages earned in the domestic economy. So foreign domiciled companies (i.e. foreign investors) doing business here continue to pay their income taxes at home, NOT HERE.
Who will pay income taxes are owners of DOMESTIC companies (think Colina, Commonwealth brewery, Arawak Homes, Kelly's etc.)
These people are NOT foreign investors and they will NEVER leave here because this is the only place on earth they can make money. Of course they should be taxed on their HUMONGOUS income.
Also, highly paid managers (mostly Bahamian) of foreign investment projects would pay tax income tax. How would that chase away foreign investors??
It is so frustrating how basically uninformed we are on these simple subjects in this country!!
Posted 9 December 2020, 2:57 p.m. Suggest removal
DWW says...
Com Brewery is owned by Dutch. 0% bahamian ownership. Bahamians can and do make income all over the world. More tax without a corresponding increase in government services is just additional cronyism potential. Increasing taxes of any kind will not dealing with the issues that make government ineffective/inefficient/unaccountable is just feeding the flames.
Posted 14 December 2020, 9:16 a.m. Suggest removal
JokeyJack says...
An income tax won't work here. If govt decides to go with it, just increase the employee % of the monthly NIB payment. NIB has the best database of Bahamians in the country (except probably any that the U.S. Embassy may have), and so there is no need to reinvent the wheel here.
Income taxes don't work in the Bah (won't work) for exactly the reason given by the previous commenter - some pay, and some don't. In the Bahamas, there is no law that applies equally to all - whether it be the most high crime law or the lowest tax offense. Because we are a small nation of "family" islands where everybody is family, it's a "who you know" and always has been.
We like to make high fines and penalties and seldom enforce them, instead of having low penalties often enforced bringing a stead stream of income. Every law in the Bahamas says "A fine not exceeding $x or a term of imprisonment not exceeding (some time) or both fine and imprisonment." It's like a stuck record. No imagination whatsoever, and everything that has a penalty risks imprisonment. With what we know about prison, it is hard to justify the national outrage at homosexuality. How do you square the two together? Homosexuality is not good, unless you steal a loaf of bread - then off you go, no problem.
Posted 8 December 2020, 3:20 p.m. Suggest removal
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