By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister yesterday defended the Government’s aggressive target of more than tripling real property tax collections by asserting it plans to collect 75 percent of annual billings “within the next four years”.

Philip Davis KC, leading off debate on the Fiscal Strategy Report 2022 in the House of Assembly, reiterated that the Government presently collects only 40 percent of the real property tax it issues bills for every year.

Responding to Michael Pintard, the Opposition’s leader, who last week said he was “stunned” by the Government’s forecast that property tax revenues will more than triple to $555m by 2026-2027, the Prime Minister said such low compliance rates “must change”.

“The basic fact is that we collect less than 40 percent of the real property tax that is billed annually. Let me say that again. The Government of The Bahamas collects less than 40 percent of the real property tax that is billed annually,” Mr Davis told MPs.

“Honourable members should appreciate that the Government’s revenue from real property taxes would be more than doubled if all real property tax billed was collected. That has to change. And, to do so, we are making some necessary investments in technology and people. Within the next four years, our goal is to collect more than 75 percent of the property tax billed.”

However, based on Mr Davis’ 2022-2023 Budget address from last May, total annual real property tax billings are currently valued at a collective $280m. Increasing the collections ratio by 35 percentage points would, based on the latter sum, take the Government’s annual real property tax income to $210m from the $169.4m forecast for 2022-2023 and the $147m collected the prior year.

The $280m billing value is almost half, or 50 percent, of the $554.5m real property tax revenues projected to be collected in 2026-2027. It is also less than the $501.2m forecast for the immediate term in $501.2m, and the considerable gap between these figures suggests the Government may have to do more than greater compliance and enforcement.

The Government, though, retains significant options for increasing real property tax yields beyond collecting the estimated $600m-plus in outstanding and past due taxes. It could increase rates, as well as further raise or eliminate the $120,000 cap, and end or amend the multiple carve-outs and exemptions granted from paying the tax. For instance, The Bahamas’ largest taxpayers - the hotels - are frequently exempted from real property tax payments in their Heads of Agreement.

Mr Davis signalled yesterday that the Government is also focusing on improving real property tax compliance in the Family Islands. This is linked to the Government’s initiative to ensure 25 percent of the funds collected in these locations go into the Family Island Development Fund.

“Having completed the first mass re-assessment exercise in New Providence, over the next three years we are embarking on a comprehensive real property tax reassessment exercise in the Family Islands,” the Prime Minister said, referring to the work performed by Tyler Technologies in revamping property valuations and real estate included on the tax roll.

“This is a key component of our plan to triple revenue from the Family Islands over the next two years. I would like to remind honourable members that this effort will be of substantial benefit to the Family Islands, as we have committed that 25 percent of collected real property tax collected will go into the Family Island Development Fund.”

Mr Davis left real property tax with a parting shot at the Minnis administration, saying: “We have also intensified our efforts in respect of the collection of property tax arrears. The previous administration allowed contracts with private collectors to expire. We have reinstated them. And, madam speaker, I am happy to report that these efforts have already produced a very favourable early harvest.”

The Prime Minister also attributed the slight improvement in 2021 second quarter economic activity to the Minnis administration’s $231.2m increase in pre-election spending, describing this as unsustainable and producing no real or long-term impact. “I simply cannot imagine why the Government went on such a useless spending spree in the run-up to the election,” he joked.

Elsewhere, Mr Davis said the Government’s plans to rationalise and streamline its fiscal reporting schedule via reforms to the Public Finance Management Act were not designed to water down transparency or accountability when it comes to the Government’s finances.

He added that this year will be the last that the Fiscal Strategy Report and Medium-Term Public Debt Management report that are issued and debated as standalone documents. Moving forward, Mr Davis said they will be released alongside the Budget to prevent “political mischief” that he asserted undermines The Bahamas’ economic and fiscal credibility.

The Opposition has frequently voiced concern that “inconsistencies” between the projections in the Fiscal Strategy Report and annual Budget harm The Bahamas’ in the eyes of investors and the international markets, but the Prime Minister argued that the latter is developed via a separate and “much more vigorous process”.

Pointing out that the Fiscal Strategy Report’s forecasts are “not binding”, he added: “This misunderstanding, whether feigned or real, is a major reason why this year’s debate will be the last debate of the Fiscal Strategy Report and the Medium-Term Debt Management Strategy as standalone documents, debated in isolation.

“The political mischief-making that accompanies these debates does real reputational and economic harm to our country..... This will ensure that all documents are based on the same economic assumptions, something which is not possible in the current framework, whereby one document is tabled in November and the other is tabled months later, in the last week of May.”

Mr Davis said the Government’s presently limited information and financial reporting systems make the current fiscal disclosure demands “simply unworkable”. And, given the ten months’ that elapse between the Fiscal Strategy Report’s compilation in August/September of every year, and the Budget’s May disclosure, Mr Davis said it was inevitable that the latter’s estimates will be revised to reflect fiscal and economic performance changes.