More than 35,000 properties are not registered in The Bahamas' real property tax (RPT) system, resulting in the government only collecting 50 percent of real property taxes owed, Guardian Business can reveal."We have reason to believe that almost half of the non-exempt properties are not getting their bills for various reasons, including inaccurate billing addresses," according to Michael Halkitis, minister of state for finance, who added that the government is looking to modernize and reform the country's property tax legislation and the RPT system.
Halkitis noted that the system suffers from a number of critical structural defects which have resulted in revenues generated being 'significantly' less than what should rightfully be collected."There are grave deficiencies in the property tax coverage ratio, the billing ratio and the collection ratio. Specifically, for the 2011 tax year it is estimated that nearly one third of the properties that should be assessed are not covered or registered in the RPT database. That amounts to about 35,000 properties being outside the system," he shared.
According to him the first step in the reform process has to be the identification of major gaps in RPT performance relative to desirable norms. Halkitis revealed that the government is moving ahead with the reform of the RPT system with the assistance of an international expert. "We will have to adopt modern approaches that rely on intelligence gathered from satellite imagery and GPS technology. We will also have to embrace computer-assisted mass appraisal (CAMA) systems that are currently in use in almost every country," he noted.
Halkitis also noted that the government will be seeking to fix billing deficiencies. Out of the reported 88,000 properties that are currently listed on the tax register, nearly 22,000 benefit from the owner occupied exemption."There are significant challenges with valuation ratios as assessments do not track changes in market values as closely as might be desirable. In the view of experts within the ministry, under a well-functioning system we can allow up to 10 years to lapse between assessments.
And so when valuation adjustments occur many property owners experience a sticker price shock," Halkitis said.Specific reforms have been developed which could readily double property tax revenues over the next five years.He added, "These reforms will have to be comprehensive. Through their implementation over the next several years, the RPT system will become considerably improved in respect of both customer service and revenue collection.
"In December, some of the country 's top realtors listed poor communication, slow processing and the lack of accountability for offenders as areas that the government must address when reforming property tax. It's estimated that the country misses out on untold millions each year through poor regulation and collection."It is so simple that it's mind boggling," said George Damianos, president of Damianos Sotheby's International Reality."If you don't pay your taxes, how many follow-ups does that person get through mail or telephone calls? It doesn't happen, but it should happen.
There should be penalties and enforcement of the interest. The first thing is to get after these people. I see it across my desk. There are many people who don't pay and there is no accountability."President of ERA Dupuch Real Estate Peter Dupuch told Guardian Business that property tax must be treated as a prerequisite. "Similar to a business license being required to perform commercial activity, taxes must be tied with property rights and transactions to make it mandatory," He said valuations of homes are often not accurate, leading to inflated taxes for homeowners.
People are also charged huge "lump sums", representing three years of payments out of the blue."Mario Carey, the president of Mario Carey Realty, said there is a "communication disconnect" between homeowners, attorneys and the government. "I find international clients are often not made aware of the process. Most of them want to pay, but nobody communicates or gives any kind of notice," he explained. "You would think the attorneys would tell them that."
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