A Bahamian real estate agent argued yesterday that “the giveaway for the mega rich must end” as he urged the government to exploit the current boom in high-end real estate to increase property tax revenues.
Christopher Armaly, a prominent broker and appraiser, told Tribune Business that the newly elected Davis administration should particularly seek to raise an annual cap of $ 60,000 on property tax, which would ensure that Bahamians in the class average actually pay a higher tax rate than people with homes worth $ 10 million and above.
All owner-occupied homes, that is, residences used exclusively as housing by their owners, receive tax relief on the first $ 250,000 of their property appraisal. A rate of 0.625% is applied to the next $ 250,000, and this rate increases to 1% for the remaining portion of the assessment greater than $ 500,000.
However, Mr Armaly said the $ 60,000 maximum limit on annual property tax payments effectively leaves a $ 40 million homeowner’s tax rate at just 0.15%. This is four times lower than the rate applied to the $ 250,000 to $ 500,000 portion of a property’s value.
Applying the cap to properties valued at $ 30 million, $ 20 million and $ 10 million results in effective tax rates of 0.2%; 0.3%; and 0.6% respectively, all lower than the property tax rate that middle-class Bahamians – who have less income and ability to pay – face on owner-occupied residences between $ 250,000 and $ 500,000 .
Stressing that this is a regressive aspect of the Bahamian tax system, Mr Armaly urged the new administration to increase the property tax cap to at least the low five-digit / high six-digit range for s ” ensure that wealthy citizens and residents pay their fair share of taxes.
Suggesting that the property tax exemption threshold be raised from $ 250,000 to $ 400,000, in order to relieve middle and low-income Bahamians, he also called on the government to extend the VAT tax relief from the Minnis administration on real estate sales to the same segment of the population.
The former government, in the 2021-2022 budget, increased the VAT rate on real estate sales to 12% for the portion of a property’s value above $ 2 million. Mr Armaly, however, suggested overturning that script and extending this tax break to low- and middle-income Bahamians by lowering the VAT rate on the first $ 100,000 of a property sold to just 2.5%.
Acknowledging that he is likely to “laugh at my colleagues” in the real estate profession for making such suggestions, he argued that the Bahamas must break away from “elitist” thinking and decision-making which has resulted in reduce the country’s tax structure. progressive and linked to the ability to pay.
“You can’t tell me that someone who earns $ 60,000 to $ 70,000 a year pays a higher rate than someone who earns millions of dollars,” Mr. said everything they consume.
“Do you think $ 60,000 on a $ 40 million house is enough tax? Think about it. Sixty thousand on a $ 40 million house. It is absolutely nothing. I understand that we want to encourage investment, but if we are to do that, I, you and everyone in our economy class should get the same rate. Why should they get the break and we don’t have a break? We get milked and milked.
“I’m going to catch holy hell, but fair is fair, and at some point we have to have principles that we have to define. The freebie for the mega rich must end. I don’t want to sound like Joseph Stalin, but this has to stop. It’s impressive. They received a letter, and they did not fight it. They turned and ran away with their tails between their legs. They are laughing at us, and it is a gift for them.
Mr Armaly’s reference to a letter hints at the 2018-2019 budget reversal of the former Minnis administration when, after increasing the VAT rate from 60% to 12%, it quickly backed down on changes to the definition. of “owner occupied” property tax. ownership following resistance from owners of Lyford Cay and other upscale communities.
They vehemently pushed back reforms that would have both removed the then $ 50,000 tax “cap” and doubled the tax rate at which second home owners do not reside in the Bahamas for six months a year, from 1 to 2 %.
However, Mr Armaly – while stressing that the annual property tax cap should not be raised to ridiculous levels – argued that an increase in the high five-figure / low six-figure range was unlikely. to push the billionaire and multimillionaire owners of the Bahamas’ shores.
“There’s no reason we can’t go to $ 100,000 – $ 120,000 on the cap,” he argued. “I don’t think going from $ 60,000 to $ 70,000, $ 80,000, $ 90,000, $ 100,000 a year will make them go.” Stating that such increases were probably “a drop in the bucket” for many wealthy overseas homeowners, Mr Armaly added that the location, climate and the Bahamas’ reputation as a safe investment haven are equally important. attractions that are difficult to pass up.
And, he added, many Americans see offshore real estate investments in the Bahamas and elsewhere as essential hedge against rising inflation and potential tax increases from the Biden administration in their country. “They can afford it,” he added. “They make $ 60,000 every 15 minutes. A mouse click from the stock exchange. That’s why I don’t think it’s unreasonable.
“Compared to other parts of the world, from what I can see on the tax rates, the tax rates in the United States and Canada are much higher. The last two or three governments in the Bahamas have focused on the mega-rich; that’s all they wanted to bring here, all high end, all high end. If that’s what they want, they have to pay.
The Liberal Progressive Party’s (PLP) election campaign master plan promised to “ensure that high-end properties pay their property tax and” to ensure that commercial and foreign properties are registered and properly assessed at for tax purposes ”. However, there was no mention of increasing tax rates or raising the cap by $ 60,000.
Several real estate agents, when asked if it was possible to generate more income from property taxes, generally objected to this on the grounds that any rate hike will drive buyers away and burst the ‘bubble’. current market. They also suggest the government is looking to collect the $ 600 million in unpaid property taxes off the books first and focus on other areas such as increasing the permanent residence threshold.
However, with the Bahamas burdened with a national debt of $ 10.4 billion currently larger than the size of its economy, as well as another downgrade from Moody’s given its economic and fiscal woes, tax increases and revenues targeted at those who have the ability to pay will likely need to be considered by the government.
“I think I get emails every day about several million properties sold,” Mr. Armaly said. “The middle class market, however, is dead. The $ 300,000 to $ 800,000 market is dead. The $ 3-4 million, $ 5 million, $ 10 million and more are booming.
“I hope this government is off to a good start. I would like them to increase the homeowner exemption threshold to $ 400,000, be exempt, and I would like the first $ 100,000 on the real estate transaction to be 2.5%, then pay 10% from $ 100,000. Let Bahamians get $ 100,000 at 2.5%. In the high end, they benefit from the first $ 2 million at 10%. Give us the advantage too.