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News Report: Minister ‘Shocked’ By Realtors’ Challenge To Real Property Tax

Written by Neil Hartnell, Tribune Business, January 27th, 2022

  • Says BREA ‘encouraging people not to pay’

  • Realtor body argues valuations illegal, void

  • Chamber: Phase-in up top 435% increases

A Cabinet minister yesterday said he was “shocked and disappointed” that Bahamian realtors are calling for the withdrawal of all 2022 real property tax bills because they are “illegal and invalid”.

Michael Halkitis, minister of economic affairs, told Tribune Business the legality concerns raised by the Bahamas Real Estate Association (BREA) over the recent valuation exercise “do not arise” and voiced surprise that it would “encourage people to ignore their obligations” to pay due taxes given the Government’s dire fiscal position.

“Frankly, I am shocked and disappointed that BREA would take such a position, especially to encourage people to ignore their obligations given our need to improve our fiscal position,” the minister said in response to this newspaper’s inquiries, as the backlash over property tax bills that have increased by up to 435 percent continues to mount.

Mr Halkitis pushed back after BREA published a statement, understood to have been vetted by its attorneys, in which it urged the Davis administration to withdraw the 2022 real property tax bills now being mailed out to home and business owners on the basis that the appraisals supporting the Department of Inland Revenue (DIR) valuations are not valid or illegal.

BREA, echoing concerns first printed in this newspaper earlier this week, said US-based Tyler Technologies, which was contracted by the DIR to conduct the New Providence-wide mapping exercise behind the triple-digit tax bill increases, cannot legally conduct appraisals/valuations in this nation because it is not licensed to do so.

And nor could it be licensed, the Association added, because only Bahamian citizens or permanent residents with the right to work can be authorised to do appraisals under the Real Estate (Brokers and Salesmen) Act 1995 via its sections four and 13.

Tyler Technologies effectively confirmed it was providing appraisal services to the Government in a May 2019 press release seen by Tribune Business. “We are pleased to be selected once again to provide appraisal services to The Bahamas and bring fair and equitable taxation to its residents,” said Jake Wilson, its vice-president and general manager of appraisal services.

While backing the Government’s decision to use Tyler’s software to modernise real property tax administration, BREA said: “At no time did Tyler submit to BREA application(s) to license its appraisers under their contract with the Government. BREA has not granted any appraiser licenses to Tyler or its personnel.

“Based on evidence in the Tyler press release, Tyler has admitted that it was contracted by government to provide appraisal services to government on two occasions. Under the Act, such appraisal services were illegal without a valid licensed issued under the Act.

“By extension, any reassessed property value undertaken and provided to the DIR or government by any unlicensed representative of Tyler should therefore be deemed illegal and void in law. Under the circumstances, and on behalf of the residents of The Bahamas, BREA kindly asks the Government to immediately withdraw altogether its 2022 assessment of real property tax.”

Mr Halkitis and the Government, though, made the counter-argument that the powers of the Government’s chief valuation officer to assess property values for taxation purposes are “totally unrelated to the provisions of The Real Estate (Brokers and Salesmen) Act 1995”.

They pointed to the Real Property Tax Act 2010’s section seven, which states that this official has the duty to determine which properties - and owners - are liable to pay taxes. “No such prohibition regarding citizenship or work permits can be found in the Act,” the Department of Inland Revenue said in a statement last night.

“And the chief valuation officer (CVO) has the power to obtain information from any person that is relevant to the CVO’s accurate assessment of property under the Act.” As a result, Mr Halkitis said the issues raised by BREA have no impact.

“In performing their duties under the Act, the chief valuation officer can use whatever tools he has at his disposal to assist in his/her work,” the minister told Tribune Business. “So this issue of unlicensed appraisers does not arise. I encourage all to pay their property tax and remind them that there are mechanisms in place to hear and resolve any disputes.”

However, BREA is far from the only private sector group urging the Government to change course. The Bahamas Chamber of Commerce and Employers Confederation (BCCEC) yesterday issued its own statement calling on the Davis administration to phase-in the real property tax increases, rather than implement them in one go, due to the “devastating” impact on already-struggling firms.

With taxpayers reporting up to a six-fold year-over-year increase in their real property tax bills, the Chamber said: “The reassessment has resulted in a higher valuation of some properties and, consequently, an increase in the invoice amount compared to the previous tax year. In some cases, businesses and employers have found the dollar value increase significant and shocking.

“The BCCEC urges the Government to consider the impact of Hurricane Dorian and the COVID-19 pandemic on the business community and employers in The Bahamas. In this case, due to the protracted time between previous assessments, which is not the fault of property owners, the re-assessed taxed amounts have amounted to increases of between 0 to 500 percent due to the appreciation of property values during the time between assessments.

“For example, some property owners have reported tax increases of between 100 percent to 435 percent from the previous year. Such a significant and sudden increase in tax liabilities can devastatingly impact businesses and employers, particularly in an economic downturn,” the Chamber continued, arguing that its approach was “fair and balanced”.

“Therefore, the BCCEC urges the Government to consider a glide path approach to implementing the changes prompted by the property re-assessments. Such an approach would lessen the tax price shock and economic strain on taxpayers.

“A staged implementation would best ensure businesses remain going concerns, successfully rebound from the economic downturn, and continue to contribute to the country’s economic growth and sustainability.”

Still, BREA’s position threatens the Government’s drive to broaden the real property tax base by getting all properties worth $250,000 and upwards on the tax roll and paying their “fair share”. In particular, the issue raised by the real estate body could provide the foundations for a legal challenge which, if successful, could create upheaval for 2022 billings and government revenues.

David Morley, Morley Realty’s principal, who first raised the concerns surrounding Tyler Technologies’ involvement in producing appraisals on the Government’s behalf, yesterday told Tribune Business he was sceptical of the Government’s assertion that the Real Estate Act does not apply to real property tax valuations.

He argued that, in conducting such an exercise, the Government has “to use lawful tools; they cannot be illegal tools”. Mr Morley recalled how a Florida-based appraiser was told by then-Supreme Court justice, John Lyons, that neither himself nor his work could be admitted into evidence in a legal dispute because he had been conducting business here illegally as an unlicensed realtor.

Suggesting that “they’re going to try and wiggle around this one”, Mr Morley said the critical issues were how some of the huge increases in valuations and tax bills had been determined, and the wisdom of implementing these hikes in “one shot” amid a fragile economy where many businesses and households are still trying to rebound from COVID-19’s devastating impact.

“I don’t envy the Government in any form or fashion, but normal business people do not conduct business in this manner,” he added. “The public is only asking to be treated fairly. You have to work with your community and be fair and reasonable.”

The Ministry of Finance, in an earlier statement prior to BREA’s release, again argued that the greatest tax increases were being experienced by taxpayers whose real estate had been substantially under-valued for years or those who had previously shirked their obligations by failing to declare their properties and have them included in the tax roll.

It also also hinted that the tax increases had largely fallen on higher-income properties, suggesting that the Bahamian middle class had largely been protected, although Tribune Business has seen billings from such taxpayers that have increased five times’ year-over-year.

Simon Wilson, the Ministry of Finance’s financial secretary, said in a statement that the $312.50 rebate provided to all owner-occupied residential properties means that all those valued at $300,000 and below will effectively be exempt from paying the tax this year.

“The government has introduced a $312.50 rebate for every owner-occupied property that effectively raises the threshold for payment by $50,000 from $250,000. This means anyone who owns a property valued at $300,000 or below will not pay real property taxes,” Mr Wilson was quoted as saying.

“Through the introduction of this rebate, 87 percent of residential property owners will pay $1,000 or less in real property taxes. The revenue gained is through a broadening of the tax base by identifying previously unregistered properties and by ensuring everyone is paying the correct amount.”

The Ministry of Finance repeated earlier assertions that “nearly 70 percent of all Bahamians are projected to see no change or will pay less as a result of these changes”.

It added: “The other 30 percent may see increases related to the alignment of their recorded property value with the current market value, as assessed by the Government, ensuring that owners of higher value properties are not underpaying.”

It is unclear, though, whether these percentages are based on all New Providence residences or just those valued at over $250,000 and liable to pay real property tax. The Davis administration, though, is sticking to its argument that the revaluation has created greater fairness and equity in the real property tax system.

Mr Wilson said the New Providence-wide revaluation was designed to ensure owners of new and higher-value properties are paying their fair share in taxes.

Read the entire news report here:

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