Property tax revenue in The Bahamas has surged by 45.2 percent in the first half of the fiscal year, driven by significant increases in taxes from commercial properties and foreign-owned undeveloped land, with property tax collections having doubled over the past three years, Prime Minister Philip Davis revealed.
During his mid-year budget communication on Wednesday, Prime Minister Davis stated: “There has been a 45.2 percent rise in the property tax revenue for the first six months of this year compared to the same period last year. This rise was driven by an 83.4 percent increase in property taxes on commercial properties and a 77.9 percent increase in property taxes on foreign-owned undeveloped land. Compared to the same six-month period three years ago, property tax collection this year has doubled, growing by $31.8 million.”
He noted that over the past three years, the real estate sector has consistently highlighted a growing interest in Bahamian properties, with one real estate company enjoying over $2 billion in sales during the period.
“Despite such growth, the anticipated benefits have not been reflected in the Government’s fiscal accounts, particularly as the VAT on real estate has underperformed. At present, the most straightforward means of establishing property ownership in The Bahamas involves the payment of VAT on real estate and the proper registration of property documents. Regrettably, many individuals have overlooked these essential steps, resulting in significant revenue losses for the Government due to the failure to formalize property ownership,” the Prime Minister noted.
To improve compliance, Davis stated that his administration has reduced VAT on real estate for Bahamians, and VAT on real estate is now being logged and tracked electronically by the Department of Inland Revenue for auditing and compliance purposes as part of the Government’s revenue enhancement strategy, among other initiatives.
He further noted that during the first half of the current fiscal year, a total of 1,679 conveyances were processed for VAT stamp tax. Companies and foreign individuals together represent 42.3 percent of these conveyances, accounting for 79.4 percent of the total revenue from VAT stamp tax on conveyances.
“In contrast, Bahamian companies and Bahamian individuals together contribute only 20.6 percent of the total revenue collected from this tax. These statistics are important because they show that VAT on real estate, as well as property taxes, are primarily incurred and paid by foreign owners. For instance, the average VAT on real estate paid by a Bahamian is $9,133, whereas the average paid by a foreign owner is 11 times as much, at $104,384. The recent amnesty program for VAT stamp tax, which was extended into this fiscal year, showed that the average tax paid was $7,660 from 816 applicants. This average tax paid indicates that many large properties were not in this tax net,” said Davis.
Davis asserted that the buoyancy of the high-end real estate market should accurately be reflected in the government’s revenue receipts. Since the highest level of tax payments on real estate are made by foreign owners, it is increasingly vital for the government to ensure that it captures the full potential of this revenue stream. “What is owed to the Government and the people of The Bahamas should be paid, especially by those who can afford it.”
He added, “Proper enforcement of VAT on stamp tax not only helps maintain the integrity of the tax system, but also ensures that the benefits sought by foreign owners from a thriving real estate market in The Bahamas are realized in terms of increased government revenue. This revenue is essential for funding public services and infrastructure, contributing to the overall economic well-being of The Bahamas. This is why it is imperative that measures are put in place to enhance compliance and effectively monitor transactions regarding real estate.”
VAT on real estate is now being logged and tracked electronically by the Department of Inland Revenue for auditing and compliance purposes as part of the Government’s revenue enhancement strategy. For the first half of the current fiscal year, a total of 1,679 conveyance documents have been processed for VAT stamp tax. Of these, foreign companies make up only 9 percent of the total but contribute 52.2 percent of the total revenue collected from VAT stamp tax on conveyances.
