Government aims to triple property tax to $ 400 million


• Target 3.5% of GDP against 1% currently

• Senior civil servant: Compliance at only 25%; others at 90%

• “Tools” to achieve a revenue ratio of 25% without new taxes

By NEIL HARTNELL

Editor-in-chief of the Tribune

[email protected]

The government aims to more than triple annual property tax collections to at least $ 400 million, a key part of its ambitions to achieve a revenue-to-GDP ratio of 25%.

Simon Wilson, finance secretary at the Department of Finance, told Tribune Business that he estimates annual property tax collections should be equivalent to 3.5% of Bahamian gross domestic product (GDP) or economic output. , as opposed to current returns of around 1%.

Noting that the Bahamian property tax compliance rate was “around 25%”, compared to the 90% average achieved by many countries on property taxes, he argued that the potential for better returns from this and other existing levies was the reason why no new and / or increased taxes may be required to meet the Davis administration’s revenue ratio target.

Many observers have suggested that the 25% revenue-to-GDP target cannot be achieved just by cracking down on tax evaders and improving administration / collection, but Mr Wilson replied: ‘No, it doesn’t. will not be impossible. This [the ratio] is higher than where we are now, but it is in the range where we were before.

“A number of things to keep in mind: Number one, we think property tax as a percentage of GDP should be around 3.5%. It is currently around 1%. The government has done a lot of property tax work over the past six years with Tyler Technologies and so on. We believe that the work will pay off in the years to come.

A revenue-to-GDP ratio of 25%, which Prime Minister Philip Davis QC aims to achieve by the end of his administration’s term in 2026, is well above what the government’s budget performance has ever produced before.

Data accompanying the recent 2021-2022 Supplementary Budget shows that recurrent revenue, as a percentage of GDP, has ranged from a low of 16.3% to a high of 18.9% over the past five fiscal years, the latter result being reached in the country ravaged by COVID-19. Period 2020-2021 when economic output fell below $ 10 billion to help produce the highest ratio.

Government forecasts, however, show that the revenue-to-GDP ratio is steadily increasing, from 20.2% in the current fiscal year to 20.5% in 2022-2023 and 21.7% in 2023-2024. – a trend towards the objective set by Mr Davis. And, with other Caribbean countries enjoying income ratios close to that target, the Bahamas is believed to have significant room for improvement.

Nonetheless, the magnitude of the revenue increase required to reach 25% of GDP is graphically illustrated by the government’s current fiscal and economic forecasts. Based on the $ 12.459 billion and GDP 13.279 billion at current prices projected for 2022-2023 and 2023-2024, respectively, the total revenue of the public treasury in these two years is expected to be $ 3.115 billion and 3 , $ 32 billion to achieve the goal.

Both figures are about $ 700 million higher than the government’s previous record year of 2018-19, the last before COVID and Dorian, when some $ 2.426 billion in recurring revenue was raised. This gives an indication of the increased revenue sought by the Davis administration as the Bahamas seeks to extricate itself from its economic and fiscal crisis.

Mr Wilson said yesterday that, based on 3.5% of GDP, the government will seek annual property tax revenues of around $ 400 million instead of the estimate of $ 350 million originally proposed by this newspaper. . “The respect for property tax is around 25%. Compliance with property taxes in most countries is around 90 percent, ”he added of the possibility of increasing collections.

The $ 400 million target would almost triple the $ 158.814 million the government plans to collect in property taxes in the current 2021-2022 fiscal year. Increases to $ 181.142 million and $ 218.3 million are slated for 2022-2023 and 2023-2024, respectively, but the latter is still nearly 50% below the level suggested by Wilson.

The PLP and FNM administrations worked closely with the American company Tyler Technologies to improve the property tax collection database, increase the number of properties on the tax roll and lay the groundwork for a collection, d ‘improved application and administration.

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

“The challenge is that we still have a significant number of properties in the system that are classified as unknown; properties where there are no registered owners, ”revealed the financial secretary. “But it’s almost done and we think we’re pretty happy with the product we’ve seen so far.

“There have been gains. I don’t have those numbers at my fingertips, but it appears, from what we hear from the Home Revenue Department, that a substantial amount of [new] real estate has been registered and the increase in tax debts could be substantial. It depends on the approach taken by the government.

Mr Wilson said the Real Property Tax Act allows the government to retroactively assess back taxes for up to ten years on properties that were eligible for payment but were not on the roll. “It could be a year, five years,” he added. “It’s unlikely to be five years, but the question is what are we doing. “

Speaking at the Finance Department press conference earlier, Mr Wilson said: “One of the most interesting things we found was that if you look at the electricity bills in the Bahamas, you have more than people on the BPL (Bahamas Power & Light) roll that you have registered land.

“For every house there should be an electrical connection. We have more electricity connections than we have homes under the property tax system. We have a strategy for managing property tax collections that we will unveil with the mid-year budget.

Mr Wilson told Tribune Business the government is not just focusing on property taxes to meet its target of 25% revenue to GDP. “We will do a VAT gap analysis and look at VAT payments on a sectoral basis,” he said. “We believe there are still significant VAT compliance issues that we can resolve and provide additional income buoyancy.

“We believe that customs, even if we expect a drop in the average tariff rate, compliance can be improved to increase revenue. The IMF report alluded to this. Mr Wilson said the upcoming semi-annual and annual budget will allow the government to present more details on its budget plans, and “what we are seeing that gives us confidence that the tax system can accommodate 25% of revenue relative to GDP” .

The senior finance ministry official also revealed that a study on corporate tax, given global pressure for such a levy with a 15 percent rate, has been launched. “It could influence the tax mix in the future,” he said. “But all other things being equal, we believe we have enough tools to reach 25%. “


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