Thursday, February 14, 2013
Thursday, February 14, 2013
The government is collecting roughly half of what it should receive in real property taxes, with about 35,000 properties currently outside the system, Minister of State for Finance Michael Halkitis disclosed yesterday.
“The real property tax (RPT) system suffers from many critical structural defects and, as a result, revenues generated by the system fall significantly short of the amounts that should rightfully be collected,” Halkitis told members of the Bahamas Chamber of Commerce and Employers Confederation at a lunchtime meeting February 13, held at the British Colonial Hilton.
He said that he believes reforms that are in the pipeline could double property tax revenues over the next five years.
The government is looking to enhance revenue collection across all platforms, he said, as it moves to restore the public finances to a healthier and sustainable position over the long term.
“The very first step in the reform process has been the identification of the major gaps in RPT performance relative to desirable norms,” said Halkitis.
Grave deficiencies exists, he said, in the property tax coverage ratio, the billing ratio and the collection ratio.
For example, in the 2011 tax year, it is estimated that nearly one third of the properties that should have been assessed were not covered or registered in the RPT database. That amounts to 35,000 properties being outside the system.
In respect of owner-occupied property, there is no tax on homes valued under $250,000. Homes between $250,000–$500,000 pay 0.75 of a per cent on market value. Owners of homes valued between $500,000 and not exceeding $5 million pay one per cent of market value. Real property tax is placed at 0.25 per cent on that part of a home’s market value greater than $5 million.
Taxes are due within 60 days of the date on which the assessment notice is served. The money is paid into the Public Treasury.
Halkitis says the government is zeroing in on how to remedy billing deficiencies.
Of the 88,000 properties that are on the tax register, almost 22,000 benefit from the owner occupied exemption, he added.
The Minister said that the government believes, however, that almost half of the non-exempt properties are not receiving their bills for various reasons–including inaccurate billing addresses.
“It means that the government is collecting only about half of what it should be getting from real property taxes,” said Halkitis.
Moreover, government is grappling with significant challenges with valuation ratios, as assessments do not track changes in market values as closely as they should. Thus, when valuation adjustments occur many property owners experience a sticker-price shock.
“In remedying these problems, the government will most likely have to modernize the property tax legislation. 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 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 collections.”