Wallace-Whitfield: VAT increase on realty transactions “will hurt” but would be compensated for with improved ease of doing business
NASSAU, BAHAMAS — Delays in various foreign direct investor approval processes are seriously impacting the ease of doing business in this nation and hurting investor confidence, the Bahamas Real Estate Association (BREA) president warned yesterday.
Christine Wallace-Whitfield told Eyewitness News the organization is pushing for improvements in the ease of doing business as the issue was becoming more than ever a sore point with investors.
“I think that the main point right now for BREA is focusing on the ease of doing business. That is the focus right now,” she said.
“That is what we want government to continue talks with BREA on. One of the main things that the government has to do is increase the ease of doing business. It’s just too hard and frustrating to do business here and seemingly so much easier elsewhere.”
She added: “It’s embarrassing and hurting our reputation. We need to do our due diligence but also act expeditiously. There is no justification for the long delays we often see in permanent residency applications or investment board approvals, for instance.”
Wallace-Whitfield further noted in a statement released on behalf of BREA that the organization would ask its clients to swallow a higher value-added tax (VAT) rate on real estate purchases if that increase came with improved ease of doing business, including speedier application processing.
Wallace-Whitfield noted: “The individual spending $2 million up to ten times that is accustomed to good service. The few extra dollars on the closing cost will hurt a little, but can be more than compensated for through speedier closings and more respect for the individual.”
She added: “These are people who are coming into The Bahamas with money to spend, helping to boost the economy, and they become very discouraged, sometimes to the point of disbelief, that it can take four to six months to close when back home in the US or Canada it would have been a matter of days.
“And this goes for Bahamians as well. We know these have been extraordinary times and we will support the government in the VAT increase, but we are serious about expecting greater respect for buyers through more efficient service and ease of doing business and that includes being creative.
“If you are looking at top dollar for the public purse, what concessions will you provide to encourage more commerce? Or is there a trade-off with reduced property tax at a later time?”
Prime Minister Dr Hubert Minnis noted during his budget communication on Wednesday that the government has begun work on a new investment regime for the country, namely Invest Bahamas. He noted the agency will have broader powers to process domestic and foreign direct investment.
Speaking to the real estate sector, Minnis noted: “We are increasing the VAT on realty transactions for that portion of a real estate transaction over $2 million. Presently, all transactions of $100,000 are subject to 10 percent VAT. With the amendment, any portion of a transaction that is over $2 million will be charged at the full VAT rate of 12 percent. We anticipate this adjustment will yield an additional $4 million.”
He added: “We are introducing legislative amendments to improve real property tax collections for commercial properties. We have had situations where owners of significant commercial properties collect substantial rent from businesses but are delinquent in the payment of taxes. The legislative enhancements will permit the government to have those rents paid to the Department of Inland Revenue (DIR) for delinquent commercial property tax owners.
“We are also including a new provision in the VAT legislation which requires a property owner to inform the DIR when they are shifting the use of their owner-occupied home into a residential or commercial rental property. This will ensure that these buildings are properly classified.”
He noted that with the assistance of the US-based company Tyler Technologies, the DIR has already completed the first phase of the upgrades to the real property tax roll. This, he said, has added some 14,000 properties to the roll and increased the value of taxable properties by $9 billion. This will translate into some anticipated $14 million in increased real property tax revenue.
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