• Gov't to forego $318.449m in tax concessions

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Tax arrears owed to the Government from three key revenue streams increased by a collective $230m during the first nine months of the current fiscal year to hit $1.13bn at end-March 2023.

Documents accompanying the 2023-2024 Budget reveal that unpaid VAT, real property tax and Business Licence fees combined, together with associated fines, penalties and surcharges, rose by around 25 percent compared to the total $900.391m arrears at end-June 2022.

While outstanding VAT remained relatively steady, the Department of Inland Revenue (DIR) figures showed a further surge in real property tax delinquency and non-payment. Commercial property tax delinquency was shown as rising by 45.9 percent during the nine months to end-March 2023, with arrears jumping from $196.814m to $287.171m.

Outstanding property taxes owed on foreign-owned vacant land jumped by 26.4 percent over the same period, rising from $214.493m to $258.177m, while delinquencies for owner-occupied properties surged by 31.1 percent to $163.855m from $124.436m at the close of the 2021-2022 fiscal year. Property tax arrears on residential property that is not owner-occupied increased by 17.2 percent during the period, growing from $149.52m to $175.296m.

Meanwhile outstanding Business Licence fee payments increased by almost $30m, or 53.3 percent, during the first nine months of the 2022-2023 fiscal year to $86.13m. This compared to $56.18m at end-June 2022.

The data, provided by the Department of Inland Revenue, and based on world tax systems, is admittedly a one-time snapshot of tax arrears owed to the Government on three of its largest and most vital revenue streams. These figures are fluid, and it is likely some outstanding debts will be paid down further.

For example, the end of March 2023 coincides with the annual deadline for Business Licence fee payments, so there is a reasonable chance that the $86.13m arrears shown will have been subsequently reduced. Yet some observers will point to the numbers as challenging the success of the Government's efforts to aggressively target chronic delinquent taxpayers thus far, and especially the work of its Revenue Enhancement Unit.

The outstanding real property tax figures are also in line with those quoted recently by Michael Halkitis, minister of state for finance. The minister affirmed just prior to the Budget that some $822.168m outstanding real property taxes were believed to be past due and owing to the Public Treasury as at May 18, 2023, a figure not dissimilar to that detailed in the Budget documents.

Of this sum, Mr Halkitis some $226m is owed by foreign property owners. A further $235m is due from commercial properties housing businesses or being used as rentals, and thus generating income. Some $155m is owned by Bahamian homeowners living in owner-occupied properties.

Meanwhile, the Budget documents reveal that the Government is forecasting that it will forego some $318.449m in potential Excise Tax and Customs duty earnings in the first nine months of the 2023-2024 fiscal year. Projections for the nine months to end-March 2024 project that it will give up some $159.225m in duties, and $127.567m in Excise Tax, under various investment incentive initiatives and programmes.

Of the $318.449m, some $100.492m - almost one-third - will be foregone under the Hotels Encouragement Act as the Government seeks to incentivise economic activity in the country's leading industry. Another $21.611m worth of concessions is forecast to be granted under the Cottage and Light Industries Manufacturing Act; $20.265m under the Family Island Development Encouragement Act; and $17.419m under the Industries Encouragement Act.

Albany, the high-end southwestern New Providence community whose lead developer is Joe Lewis' Tavistock Group, is predicted to receive $16.859m in Customs and Excise tax exemptions during the first nine months of the 2023-2024 fiscal year to end-March 2024. Another $16.992m worth of concessions is to be granted for clothing and footwear exemptions.

Michael Halkitis, minister of economic affairs, speaking at the Prime Minister's Office's media briefing last week, conceded that getting The Bahamas' back on its path to fiscal consolidation will not happen overnight. "It is a multi-year project getting the fiscal house in order," he asserted.

"In June 2021, the debt-to-GDP ratio exceeded 100 percent. It's now in the low 80 percents, and our goal is to get it back to 50 percent, in the region of 50 percent, by 2031. We are on track, but there is a lot of work left to be done to meet our targets." The 50 percent debt-to-GDP target by 2031 was set under the former Minnis administration, and was part of the initial Fiscal Responsibility Act passed in 2018.

“Next year, we project a Budget deficit of less than one percent and, just to put that into context, just two years ago our Budget deficit was over 13 percent [of GDP]," Mr Halkitis said. "So a Budget deficit of less than one percent next year, meaning that we anticipate by 2024-2025 to at least have a balanced budget.

"That would be a significant achievement coming out of the significant financial crisis that we took on when we came into this administration. Why is this important? Because the Government has to set the foundation for a stable economy."