Gov’t targets property tax tripling to $400m

• Aiming for 3.5% of GDP compared to 1% present

• Top official: Compliance just 25%; others at 90%

• ‘Tools’ to hit 25% revenue ratio with no new taxes

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is aiming to more-than-triple annual real property tax collections to at least $400m as a key component in its ambitions to achieve a 25 percent revenue-to-GDP ratio.

Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business that it felt yearly property tax collections should be equivalent to 3.5 percent of Bahamian gross domestic product (GDP) or economic output as opposed to present yields of around 1 percent.

Noting that The Bahamas’ property tax compliance rate was “around 25 percent”, compared to the 90 percent average achieved by many countries on real estate-based taxes, he argued that the possibility of achieving greater returns from this and other existing levies was why no new and/or increased taxes may be required to achieve the Davis administration’s revenue ratio target.

Many observers have suggested it the 25 percent revenue-to-GDP target cannot be attained solely through cracking down on tax dodgers and better administration/collection, but Mr Wilson responded: “No, it will not be impossible. It [the ratio] is higher than where we are now, but it’s in the range where we used to be.

“A couple of things to bear in mind: Number one, we believe real property tax as a percentage of GDP should be around 3.5 percent. It’s currently around 1 percent. The Government has been doing a lot of work on property tax for the last six years with Tyler Technologies and so forth. We believe that work will bear fruit in the coming years.”

A 25 percent revenue-to-GDP ratio, which Prime Minister Philip Davis QC is aiming to achieve by the time his administration’s term in office ends in 2026, is far higher than the Government’s fiscal performance has ever before produced.

Data accompanying the recent supplementary 2021-2022 Budget shows that recurrent revenue, as a percentage of GDP, ranged from a low of 16.3 percent to a high of 18.9 percent over the past five fiscal years, with the latter outturn achieved in the COVID-ravaged 2020-2021 period when economic output slumped below $10bn to help produce the higher ratio.

The Government’s forecasts, though, show the revenue-to-GDP ratio steadily increasing from 20.2 percent in this current fiscal year to 20.5 percent in 2022-2023 and 21.7 percent in 2023-2024 - a trend moving towards the objective set by Mr Davis. And, with other Caribbean nations enjoying revenue ratios near that target, it is thought there is significant scope for The Bahamas to improve.

Still, the extent of the revenue increase required to hit 25 percent of GDP is graphically illustrated by the Government’s current fiscal and economic forecasts. Based on the $12.459bn and $13.279bn current price GDP projected for 2022-2023 and 2023-2024, respectively the Public Treasury’s total income in those two years would need to be $3.115bn and $3.32bn to meet target.

Both figures are around $700m higher than the Government’s previous record-setting year of 2018-2019, the last before COVID and Dorian, when some $2.426bn in recurrent revenue was collected. This gives an indication of the revenue increase being sought by the Davis administration as The Bahamas seeks to pull out of its economic and fiscal crisis.

Mr Wilson yesterday said that, based on 3.5 percent of GDP, the Government will be seeking annual real property tax revenues of around $400m rather than the $350m estimate initially ventured by this newspaper. “Property tax compliance is around 25 percent. Most countries’ property tax compliance is around 90 percent,” he added of the scope for increased collections.

The $400m goal would near-triple the $158.814m that the Government anticipates collecting in real property taxes during the current 2021-2022 fiscal year. Increases to $181.142m and $218.3m are forecast for 2022-2023 and 2023-2024, respectively, but the latter is still almost 50 percent below the level suggested by Mr Wilson.

Both PLP and FNM administrations have been working closely with US-based Tyler Technologies to improve the real property tax collection database, increase the number of properties on the tax roll, and set the foundation for improved collection, enforcement and administration.

Mr Wilson said the consultant’s New Providence mapping exercise, begun under the previous administration, which aimed to capture and measure all land and buildings on New Providence, was “near completion” after being delayed by COVID-19 restrictions.

“The challenge is that we still have a significant number of properties in the system that are categorised as unknown; properties where there are no owners of record,” the financial secretary revealed. “But it is near completion and we feel we’re pretty happy with the product we’ve seen so far.

“There’s been some gains. I don’t have those numbers at the tip of my fingers, but it appears based on what we’re hearing from the Department of Inland Revenue that a substantial amount of [new] properties have been registered and the increase in tax liabilities could be substantial. It depends on which approach the Government takes.”

Mr Wilson said the Real Property Tax Act allows the Government to retroactively assess back taxes for up to ten years on properties which which were eligible to pay, but which had not been registered on the roll. “It could be one year, five years,” he added. “It’s unlikely to be five years, but the question is what we do.”

Speaking earlier at the Ministry of Finance’s press briefing, Mr Wilson said: “One of the more interesting ones we uncovered was if you look at electricity bills throughout The Bahamas, you have more people on the BPL (Bahamas Power & Light) roll than you have land registered.

“For every house there should be an electricity connection. We have more electricity connections than we have homes on the real property tax system. We have a strategy for dealing with real property tax collections that we will unveil with the mid-year Budget.”

Mr Wilson told Tribune Business that the Government is not solely focusing on real property tax to achieve its 25 percent revenue-to-GDP target. “We’ll do a VAT gap analysis and look at VAT payments on a sectoral basis,” he said. “We believe there are still significant compliance challenges with VAT which we can address and give additional revenue buoyancy.

“We believe that Customs, even if we forecast a decrease in the average tariff rate, compliance can be improved to increase revenue. The IMF report alluded to some of that.” Mr Wilson said the upcoming mid-year and full-year Budget will allow the Government to lay out more details on its fiscal plans, and “what we see that gives us confidence the tax regime can accommodate 25 percent revenue-to-GDP”.

The top Ministry of Finance official also revealed that a study on corporate income tax, given global pressures for such a levy with a 15 percent rate, has been initiated. “That might influence the tax mix going forward,” he said. “But all things being equal, we feel we have enough tools to get us to 25 percent.”

Comments

becks says...

Considering the very numerous times I've either heard people going on about the inability to register or pay online and the huge number of times over the past 6-7 years that I have spent hours helping people to register their properties and setup accounts at the RPT online portal it would be a good start if Inland Revenue would get the RPT online website and payment pages back up and actually usable. They have been problematic and fully down for most of the past two years. Pretty hard to pay your taxes when the system keeps giving error codes. The other problem is the whole process to setup an account and get registered into the system is very opaque. Then lets talk about the fact that when changes or updates are made there are no warnings that they are or have been made plus no instructions on how to implement said changes.

Posted 7 January 2022, 4:50 p.m. Suggest removal

ThisIsOurs says...

I guess there's a big juicy rock out there with some blood still in it...

Posted 7 January 2022, 5:22 p.m. Suggest removal

bobby2 says...

Beyond me why the 25% are paying Property tax when 75% don't. Are they just suckers or ????

Posted 8 January 2022, 12:15 p.m. Suggest removal

Bigrocks says...

2 interesting facts happened in the last 10 days.

Post office say they no longer put renewal notices in your box anymore.

Then it seems Government does not send out the land tax bills to anybody via the mail. So I guess locals and forieners now have to drive out to the Tax Office once or twice a year to find out what needs to be paid?

Guess they are all home collecting pay and claiming they have covid or something?

The new cost saving measure?

Every time we hear about ease of business and new computer systems and software to make things soooo much easier, everything gets 4 times more difficult

Posted 8 January 2022, 4:31 p.m. Suggest removal

BONEFISH says...

Mr. Hartnell is telling part of the story. Tyler Technologies contract was terminated by the Minnis administration in 2017. That project along side other projects like the revenue enhancement unit was abruptly terminated. Like a former contractual worker said to me in 2018, there projects are needed and have to be restarted. They were abruptly restarted by the Minnis administration after their poorly thought out tax policies stated to fail. To this day, Marlon Johnson can't answer the questions posed to him by a former senior FNM cabinet minister about that vat tax increase.

These projects serve several purposes. One ,the modernization of the revenue administration system in the Bahamas. Two, to widen the tax base. Three, increase the yield of the present tax system.

People who know how these projects were conceived and planned, know the real story behind them

Posted 8 January 2022, 4:59 p.m. Suggest removal

tribanon says...

Focussing on taxing Bahamians rather than economic policies that would create decent paying job opportunities for them in the private sector is short sighted and puts the horse before the cart. Bahamians cannot pay taxes if they have no financial means to do so.

We also desperately need to reduce our grossly over-bloated civil workforce. Simon Wilson is terribly mistaken if he thinks blood can be had from a stone. Also, the much lower hanging fruit to be had, with the biggest bang for the buck when it comes to straightening out our country's finances, is to put a colossal dent in the large scale corrupt activities of our elected officials who are inclined to give away the best that our country has to offer to greedy vulturous foreigners and foreign owned enterprises for mere peanuts in secretive quid pro quo deals.

Posted 9 January 2022, 10:24 a.m. Suggest removal

tribanon says...

cart before the horse

Posted 9 January 2022, 10:42 a.m. Suggest removal

sheeprunner12 says...

FS Wilson is right about one thing ...... Tax compliance

Bahamians & our foreign residents are all guilty.

The big Q is: how will the FS & MOF fix it

Posted 9 January 2022, 11:56 a.m. Suggest removal

concerned799 says...

I had no idea previous and current administrations had done such a great job managing the public sector payrolls. Such that no adjustment downward is required there at all even with a struggling economy and record debt! How were such feats of governance carried out?

Posted 10 January 2022, 10:16 p.m. Suggest removal

propane66 says...

Oh I see how they will triple property tax, they are tripling your rates. Have a look at this years bills folks.

Posted 11 January 2022, 11:21 a.m. Suggest removal

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