The PLP administration today made good on an election promise that would slash tax rates for homeowners but could prove a gamble for a government already cash-strapped due to a shortfall in revenue.
The bad news is it would cost the government $1.6 million in revenue for increasing the exemption limit on real property tax from $100,000 to $250,000.
Speaking on the bill this morning, former Prime Minister Hubert Ingraham said he is convinced that the government will lose revenue as a result of the new concessions, and said he disagrees with the cap being put on taxes on high -end properties such as those in Lyford Cay.
The present real property tax exemption for owner occupied premises has been in existence since 1994. But with this amendment the Progressive Liberal Party government proposes to assist homeowners by dropping taxes from one percent to 0.75 percent of the value of homes between $250,000 to $500,000.
Meantime, tax rates on homes valued in excess of $500,000 would be reduced from 1.5 percent to one percent of the estimated value.
Although real property taxes contributed some $32.9 million to the government revenue in the 2001/2002 fiscal year, Prime Minister Perry Christie denied that this concession would cost the government a lot of money.
“We anticipate that by increasing the limits, this will bring about two major improvements to the government’s revenue position,” Mr. Christie said.
“Firstly, it will reduce the rate of increase in the number of accounts that accumulate arrears, and secondly it will encourage those persons who presently have arrears to pay the arrears, or to make some satisfactory arrangement with Real Property Tax office to pay their arrears.”
This payment of arrears is necessary in order to access the higher rate of exemption.
According to Michael Halkitis, parliamentary secretary in the Ministry of Finance, Bahamians are notorious for not paying their real property taxes. Of the $32.9 million collected last year, only $4.5 million came from local homeowners.
Mr. Halkitis said that this Bill for an Act to Amend the Real Property Tax Act would ensure that no property is taxed more than $35,000 per annum.
He admitted that the collection of real property taxes “leaves a lot to be desired.”
The government, Mr. Halkitis said, is reluctant to be “iron-handed” with homeowners by issuing notices of prosecution in a timely fashion and seizing the homes of those who do not pay the required taxes. No government, he added, wants to be known for putting families out on the streets.
PLP MP’s are arguing that this bill is necessary because the cost of buying land and building homes are so expensive that average Bahamians is having to pay exorbitant taxes, even when they build their homes out of their pockets over a long period of time.
According to Mr. Halkitis, the cost of some people’s pricey homes does not accurately reflect their low income. This bill, he said, is designed to help that category of people.
However, Independent Member of Parliament for North Andros, Whitney Bastian, accused the government of dangling this tax exemption “carrot” before Bahamians only to snatch it back when they find out they can’t sustain it.
He queried who is really benefiting from this proposed legislation, if according to the Department of Statistics’ most recent survey, the average income of Bahamians is only $38,000 per annum.
“Who in the average income bracket could afford a $250,000 home?” Mr. Bastian asked.
By Tosheena Blair, The Bahama Journal
