Tuesday, September 14, 2021
• Ex-BCA chief hails package, but ‘better late than never’
• Bahamas in ‘different place economically’ if done earlier
• Warning that ‘multiple bridges to cross’ to achieve goal
By NEIL HARTNELL
Tribune Business Editor
AN ex-Bahamian Contractors Association (BCA) president yesterday hailed the Prime Minister’s home ownership tax breaks package for potentially boosting 80 percent of new construction starts, and said: “Better late than never.”
Leonard Sands told Tribune Business that while Dr Hubert Minnis should have implemented such an initiative two to three years ago its late unveiling should still be an enough to sway potential first-time homeits late unveiling should owners ahead of Thursday’s general election.
Suggesting that The Bahamas “might be in a different place economically” had the Government adopted such an aggressive package of import duty and VAT breaks sooner, he added that the plan disclosed by the Prime Minister on Saturday would potentially impact the four-fifths of the new housing starts market that falls under the $300,000 price benchmark.
However, Mr Sands’ predecessor as BCA president was yesterday more sanguine about the Free National Movement (FNM) initiative. Stephen Wrinkle told this newspaper that “the devil is in the details”, with much depending on how the programme is rolled-out and managed should Dr Minnis be re-elected to office.
He argued that it would have been better “not to throw it out as a political promise”, and warned: “There are multiple bridges to cross to get to the promised land.”
Still, Mr Sands agreed that Dr Minnis’ plans will “absolutely, absolutely” result in a construction boom should they ever be implemented. He urged whichever party is elected on Thursday to properly follow through on the initiative, suggesting that it could result in tax savings of more than $60,000 on a $300,000 home.
“One of the things that I think he recognizes, finally, is that all construction materials, whether you purchase locally or directly go abroad and import it, the Customs duty and VAT coming in from the US, represents between 12 percent to as much as 35 percent of your building material costs depending on whether you imported,” Mr Sands said.
“When you add it all together, you’re talking about 42 percent [sic] in taxes on building materials. On a $300,000 building, material costs are about half of that - $150,000. If you do not have to pay taxes, you are talking savings of between $60,000 to $70,000. I don’t know who is not going to jump at that. It’s real money that you’re talking about.”
Mr Sands said his only complaint was that the Government should have acted to implement this initiative much earlier during its term in office, rather than wait until the final hours before the 2021 general election.
“I wish the Prime Minister had done this two to three years ago,” he added. “Had he done this two years ago maybe we would be in a different place economically. It would have bolstered the economy a lot more.
“It will impact on the election. It should. If I’m a first-time home owner, I’d say it makes a lot of sense and I will support that.”
The former BCA chief added that the tax savings from the VAT and import duties exemptions on all building materials, as well as the construction contract itself, would potentially enable more Bahamians to qualify for a mortgage from commercial banks and other lenders.
“This is seminal. Never before has the Government given these kinds of concessions to Bahamians to help them own their own home. I hope whoever comes into power will do this, as it can only have an economic benefit for Bahamian citizens,” Mr Sands said.
“That’s the biggest group of persons starting new homes; those under $300,000. You’re talking 80 percent of the new build market is going to be impacted by this. Eighty percent of the market is under $300,000 for home construction. You’re talking the majority of persons that are first-time home owners being under that threshold that are going to benefit. That number represents 80 percent of all construction starts every year.”
Besides generating increased work for contractors, and more employment in a sector that Mr Sands said should be considered the economy’s third pillar after tourism and financial services, he added that it the greater activity will likely generate more taxes for the Government on the back-end than what it is giving away in concessions upfront.
Besides contractors paying higher business licence fees on their multiple contracts, Mr Sands said the spending by construction workers will trickle down into grassroots communities where it is most needed. “Anyone who argues that this will not help the sector is talking total hogwash,” he added.
Mr Wrinkle, meanwhile, said the tax breaks on construction materials “will make a big difference” but warned that supply chain disruption could disrupt Dr Minnis’ plan as doors and windows from the US, for example, are taking six-eight months to arrive from the moment they are ordered and paid for.
“It depends on the timeframe that they’re going to be extending this for,” he added. “It needs to be a long process, and I didn’t here what they’re extending the offer over. The devil is in the detail. Twelve months is not going to affect many people.
“It needs to be three years. If you’re buying a piece of property, it can take six to eight months to close on the land, and another six to eight months before you get the building permit. Then you have to get your financing. It could be a two-year process to get ready to build, and if the offer is 24 months not many people are going to benefit…..
“To throw it out as part of a promise is not a conducive way to handle this. There are multiple bridges to cross to get to the promised land.”