• ‘More powerful tool’ against deadbeat landlords
• ‘Power of sale’ to come before rent garnishing
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Ministry of Finance’s top official says business tenants must accurately identify their landlord to prevent 10-15 percent of real property tax bills from being returned annually to the Government without payment.
Simon Wilson, the financial secretary, also sought to reassure companies leasing their premises that the Government was likely to deploy a “more powerful tool” than garnishing their rental payments in cracking down on commercial landlords delinquent in their real property tax payments.
Many businesses have voiced concern this potential intervention in the landlord-tenant relationship could leave them in breach of lease agreement obligations when it comes to rental payments, but he revealed the Department of Inland Revenue will likely first turn to enhanced “powers of sale” granted in the Real Property Tax amendments that passed with last May’s Budget.
Clause nine of those reforms expands “the power of sale for all tax arrears” to every property category apart from owner-occupied homes beneficially owned by Bahamians, thus giving the Government the ability to sell underlying real estate asset to recover real property tax debts if the relevant taxpayer proves reluctant to pay or settle.
Asked about tenant fears related specifically to the “garnishing” of rent to recover a landlord’s property tax debts, Mr Wilson replied: “Why should the Government do that when it can sell the property? Why garnish the rent to the landlord if we can sell the underlying property?
“Yes, we have that provision [rent garnishing] in law, but that was passed into law prior to us simplifying the sales provision in the Property Tax Act. We know we have a more powerful tool, which is the power of sale. If there is someone who is reluctant or does not want to pay property tax, why would the Government want to garnish the rent to the landlord if it can simply sell their property?”
The Davis administration earlier this year requested that all businesses provide the real property tax assessment number for the building from which they operate even if they are merely tenants, while warning that failure to do so could delay or impact the processing of Business Licence renewal submissions.
The joint objective of the Ministry of Finance and Department of Inland Revenue was two-fold - to boost both Business Licence and real property tax revenue. By better matching business tenants to their commercial landlords, the tax authorities’ goal is to detect those among the latter who lack the necessary Business Licence for the activities they are conducting and thus clamp down on such tax dodging.
Companies were assured their landlord’s existing real property tax arrears will not impact Business Licence renewals. And, if the latter proved uncooperative in providing the relevant property tax assessment number, the Department of Inland Revenue reassured that a name and location/address of the tenant’s business is sufficient to cross-reference with the property tax roll.
“That’s where this confusion about the Business Licence doesn’t make any sense,” Mr Wilson added. “All we want to do us update our registry and tax roll. Between 10-15 percent of property tax bills issued are returned because we don’t know who the owner is. That’s our concern. Our message is we have a range of tools. The garnishing provision is indirect. Why use the indirect approach if we have the power to do it directly now?”
The financial secretary’s comments will likely cause some relief for business tenants worried about the implications for their landlord relationships if the Government moves to seize all, or a portion, of their rental payments to settle real property arrears.
Mark A Turnquest, president of the 242 Small Business Association and Resource Centre, told Tribune Business the Government needs to “bite the bullet” and deal directly with the delinquent taxpayer - the landlord - rather than bring tenants into the middle of their dispute.
“We don’t want to be between the Government and taxpayers,” he said. “It’s very difficult right now to operate a business because of the light bill hike, minimum wage increase and resulting NIB contributions increase. We’re too busy trying to stay in business. There’s too much red tape, and some of my members and clients are indicating that landlords are not receptive to this.
“If they have to give some of their rent to the Government, some of the landlords are indicating they will find them in violation [of their rental agreements]. They are not saying it explicitly, but that’s their posture. They said that implicitly. The 242 Small Business Association’s stance is not to get the small businesses involved with the Government’s tax collection and policies when it comes to property tax payments.
“Some are saying the landlord is implying indirectly they’ll kick them out,” Mr Turnquest added over the possibility of “garnishing” rents. “The legal agreements are between the landlord and the tenant. The landlord will tell the tenant right now: I ain’t pay the Government, and don’t want you to be taking rent to pay the Government. You can leave’. That’s the position for at least 40 percent of our members indirectly.”
While acknowledging that his members and clients had encountered few problems obtaining property tax assessment numbers from landlords, Mr Turnquest continued: “What the Government needs to do is directly do what it has to do with the taxpayer, the owner of the taxable building, and go directly to the landlord and deal with them directly.
“When the landlord is going to kick them out, who is going to help them? The Government needs to what it has to do, bite the bullet, use its legal powers and deal directly with the landlord. The Government should never be putting the burden on the small business owners right now because we are dealing with too much.
“We have problems with inflation, National Insurance Board increase from our employers contribution because salaries went from $210 to $260, so we don’t need any additional stress. So the Government should deal with the landlord and put them in court rather than putting small businesses in the middle of this.”
The 242 Small Business Association and Resource Centre is seeking a “seat at the table” with the Government so their concerns can be heard, while also assisting with any initiative the Government is trying to accomplish in addition to lobbying for the implementation of a Small Business Act.