By YOURI KEMP
Tribune Business Reporter
A Cabinet minister yesterday asserted that the Government is "upping our efforts" to collect a combined $461m in outstanding real property taxes owed by delinquent foreigners and businesses.
Michael Halkitis, minster of economic affairs, reaffirmed to the Prime Minister's Office media briefing that the Government is only targeting "really chronic" defaulters in both categories - and who have been in arrears for years - with the Department of Inland Revenue's (DIR) recent announcement that it plans to seize and sell-off their properties to recover these tax debts.
He also reiterated that Bahamian owner-occupied properties, where owners live in their own residences, are protected by law from the Government exercising its 'power of sale' over their real estate. They are not being targeted in an initiative which seeks to "put a dent" in the total $822.168m outstanding real property that is believed to be past due and owing to the Public Treasury.
Mr Halkitis, stating that the latter figure was the total arrears as at May 18, 2023, added that of this sum 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.
Based on these figures, foreign tax delinquents are responsible for 27.5 percent of total real property tax arrears, and commercial properties another 28.6 percent. Together, they account for a combined 56.1 percent or slightly more than half of the total real property tax arrears, and it is this that the Government is targeting with the 'power of sale'.
"Our intent is to try and put a dent in this," Mr Halkitis said. "Imagine if we can collect all $822m. It's probably not possible, but if we can collect a significant portion of it... Our view is, particularly as it relates to foreign property owners, we are upping our efforts... It's targeting chronic delinquents who have been delinquent for years and are really chronic. That's where our efforts are targeted in the main."
Reiterating that Bahamian owner-occupied properties will not be impacted, the minister added: "I think there might have been some misinterpretation that the Government is going after Bahamian homeowners. Of that $822m, only $155m is owed by owner-occupied - people who live in their own homes.
“So I just want to stress it's a big problem. A huge chunk of it is owed by foreigners. We are engaged in some activities now to go after them, for want of a better term, in terms of collection and that is where our efforts will be targeted in the main.
“I also want to say that the Department [of Inland Revenue] has been very, very accommodating in terms of people who have questions or who have objections etc in terms of taxes. We have a huge issue that we want to address, and particularly with foreign-owned properties where there's been some stubbornness in getting the number down. We have to move from the level of asking to the level of being able to use some of the powers that we have.”
The Government is "targeting extreme cases" who have totally disregarded their tax obligations for up to 10-20 years with its warning that it will start to seize and sell-off their properties to recover all arrears owed.
John Williams, the Department of Inland Revenue's communications chief, previously told Tribune Business that the notice revealing it now plans to exercise its "power of sale" enforcement tool to recover outstanding real property taxes was published because the tax authorities plan to reveal the "first list" of targeted properties and real estate in early June 2023.
Although the notice's disclosure caused some alarm and disquiet, he reassured that Bahamian owner-occupied properties are excluded from the "power of sale" by the Real Property Tax Act. And, while the notice referred to taxpayers who have been in arrears for more than seven months, Mr Williams explained that timeframe was detailed only because it is stated in the Act.
In reality, he told this newspaper that the Department of Inland Revenue is targeting long-standing bill duckers and tax cheats who have ignored all prior outreach efforts, tax amnesties, notices and communications urging them to bring their real property tax liabilities current and comply with the law. He described the focus of the "power of sale" effort as persons who are "not checking for it, and just walking by and not having any regard" for paying their fair share.
Mr Williams told Tribune Business: "This would be the final step with regards to persons who are not paying or have not paid in a while. The notice says seven months, but that's only because seven months is stated in the law. Really and truly, we are targeting extreme cases of persons in arrears for 10 years, 15 years, 20 years.
"Persons seem to think this is something new, but the 'power of sale' has been in the Act from 2009. The most recent amendment came in July last year. The only exception is Bahamian owner-occupied property." The Real Property Tax Act reforms passed to accompany last year's Budget sought to "expand the exercise of the power of sale for tax arrears to all property except owner-occupied property beneficially owned by Bahamians".
This made clear that the tax authorities cannot seize, and sell, Bahamian-owned residential property that the owners are living in. This was likely done to ensure Bahamians are secure in their own homes, and also possibly with one eye on votes. Yet with the real property tax exemption threshold now increased from $250,000 to $300,000, many middle income Bahamians - as well as those earning lower incomes - are paying no tax at all and not affected by the latest move.
Still, the wording of the Department of Inland Revenue notice - stating that delinquent commercial, residential, foreign-owned land and foreign-owned owner-occupied properties - would be subject to the 'power of sale' appeared to cause confusion for some. Many appeared to interpret "residential" as including Bahamian-owner occupied properties, even though these are protected by law.
However, "residential" applies to duplex and triplex-type complexes that are rented out by their owner landlords who do not live on property. Mr Williams said the Department of Inland Revenue's notice was intended to reinforce, and drive home the message, that the Ministry of Finance and its agencies are serious about collecting all past due tax arrears and will use every measure in their arsenal to achieve this.