By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s top revenue official has admitted that the failure of successive administrations to enforce compliance with the law has resulted in the $800m “astronomical arrears” over real property tax.

Shunda Strachan, the Department of Inland Revenue’s (DIR) acting controller, also conceded at the weekly briefing by the Prime Minister’s Office that the depth of The Bahamas’ fiscal crisis now meant the authorities “don’t have a choice” but to start applying collection measures that have existed for decades but have been little used.

“Truthfully it wasn’t something we actively did in the past,” she said of enforcement tools, “and hence we have astronomical arrears. We want persons to know now we don’t have any choice. We have to engage the tools in the legislation. That’s why I said we want you to be mindful the Department does have things today to go after arrears.... We really didn’t do much, but it’s just a different time now.”

Ms Strachan’s admission will come as no surprise to informed observers as the Government’s failure to enforce the real property tax laws has fostered a culture of non-compliance, with many taxpayers viewing payment as an option - not an obligation - safe in the belief that there would be no consequence for failing to hand over what was due.

The DIR chief, though, used last Thursday’s briefing to deliver the message that a new day has arrived and previous practices will no longer be tolerated. Besides the ability to garnish wages, bank accounts and rents, Ms Strachan said the Real Property Tax Act’s section 25 is being expanded via reforms set to take effect from July 1 that will give the Government the “power of sale” over all non-owner occupied properties where there are arrears.

Previously this applied only to foreign-owned property that was not owner-occupied, but this is now being expanded to include Bahamians. “Our message to the public is, if you have significant arrears and your property is mortgaged, go talk to your lender, your mortgagee. Between the two of you, they will be able to assist, I’m sure” Ms Strachan added.

“I’m saying that because the Department of Inland Revenue is not able to extend long payment plans any longer. We are in collection mode.” Pointing to previous tax amnesties offered to real property tax delinquents, she said: “All of that is done now and we’re in full collection mode.”

The Department of Inland Revenue chief also warned real property tax deadbeats whose assets are not mortgaged to a lender that in “another two weeks” their accounts will be handed to private collection agencies to pursue, which will result in them incurring additional fees. 

The debt and fiscal deficit blow-out produced by COVID-19, which worsened an already-dire situation, has left The Bahamas grappling with a $10.5bn national debt that is still growing while the latter is projected to remain above $500m in the upcoming 2022-2023 fiscal year.

Ms Strachan, meanwhile, also conceded that the Government is cutting commercial real property tax rates in response to the pushback it received over triple-digit percentage increases in private sector tax bills following the recent New Providence-wide assessment by Tyler Technologies.

That reassessment will now be extended to the Family Islands starting this summer, and the DIR chief said: “Commercial rates will decrease for the reason, again, that we heard the cry of the commercial community so as a result of them doing a lot of lobbying I think the rates presented for the commercial properties, you’ll see a decrease there.”

For many the commercial property tax rate will be halved, falling from 2 percent to 1 percent on buildings valued between $500,000 and $2m, while those worth more than that sum will enjoy a 1.5 percent rate.

The Government contracted Tyler Technologies to conduct an island-wide mapping exercise of New Providence that ensured all properties are captured on the real property tax roll. This, and the subsequent revaluations, are a first step in what the Government views as a wide-ranging exercise that will lead to all taxable property owners paying their fair share.

The valuation process employed by Tyler and the Department of Inland Revenue was a “bulk” assessment that used algorithms to calculate the worth of properties in a particular neighborhood or subdivision based on their dimensions/size and which category - owner-occupied, residential, commercial, undeveloped land etc - they fell into.

This has resulted in triple-digit increases for some taxpayers, with the Bahamas Chamber of Commerce and Employers Confederation (BCCEC) saying its members had reported increases of between 100 percent to 435 percent compared to 2021 billings.

However, many of the objections have likely come from high-end residential and commercial property owners, given that real property tax and its rates are structured such that the burden is heavier for more expensive real estate.

A significant portion of complaints will also stem from owners whose properties have not been valued for years, sometimes for decades, meaning that the Tyler Technologies revaluation will have resulted in a seemingly-huge tax hike even though it may have only brought the bill to the correct level. The Act calls for a revaluation to be conducted every five years, which Ms Strachan admitted has not been done, leaving the Government in non-compliance with the law.