PM Addresses Bahamas Real Estate Association

Prime Minister Hubert Ingraham said it would be fairer to zone the Bahamas for real property tax purposes as opposed to relying on sales prices to determine the value of Bahamas real estate for property tax reasons.
Mr Ingraham, addressing the Bahamas Real Estate Association on May 29th, suggested that under a zoning system, the value of property would be based on the square footage of improvements plus the value of the land.
“Then we would not have to rely on sale prices to determine the value of real estate for real property tax purposes,' he told realtors at the Bahamas Real Estate Association's 50th anniversary banquet at the Atlantis Resort of Paradise Island.
Mr. Ingraham was responding to feedback on the removal of a $35,000 cap on real property tax in 2007.
The Bahamas Real Estate Association had lobbied for the reinstatement of the $35,000 cap, The government compromised by moving an amendment to the law to reduce the tax on properties valued at over $7.5 million from 1% to 0.25%.
Mr Ingraham noted that before the cap was introduced in 2003, 17 owner-occupied properties paid annual real property taxes in excess of $35,000 in the amount of $1.1 million.
When the cap was in place between 2003-07, 57 such properties paid taxes of $35,000 a year in the amount of $2 million.
Since the ceiling was lifted in July, 2007, 68 such properties have paid Bahamas real estate property taxes in excess of $35,000 a year in the amount of $4.1 million.
“Can it be that we should design a special tax rate to accommodate 57 or 68 home-owners among the thousands of home-owners in the country; and to accommodate only the wealthiest home-owners?” Mr. Ingraham asked.
He said it's in the interest of the Bahamas that home-owners comply in paying their real property taxes owed across the board. And he welcomed suggestions from the Bahamas Real Estate Association in this regard.
“We believe that, as opposed to the use of caps at the upper end of the real estate tax bracket and or revaluation by the Chief Valuation Officer, it would be infinitely fairer if we were to zone the Bahamas for real property tax purposes, determining property value for real property tax purposes on the basis of the square footage of improvements plus the value of the land, for example. Then we would not have to rely on sale prices to determine the value of real estate for real property tax purposes,” Mr. Ingraham said.
“We must be able to agree that a 3,000-square-foot residence in Cooper's Town, Abaco, would not have the same value as a residence of the same size in Lyford Cay in New Providence. A similar analogy might be made with regard to the value of land at Ocean Club Estates on Paradise Island, for example, versus similarly-sized property in Winton or in the Grove, West Bay Street.”
It might also be considered, said Mr. Ingraham, that the real property tax value will be calculated on perhaps, 75% of a residence's sale price.
He said either or all of these suggestions could provide certainty and stability as to tax liabilities for purchasers of Bahamas real estate.
He suggested circumstances or conditions might be set out which will trigger or result in an increase in the value of Bahamas real estate in an orderly fashion so that tax increases are not unexpected or dramatic in nature.
“Or, we might agree that foreign second-home-owners might be permitted to retain a residential designation for real property tax purposes even when their residences are not occupied by the owner for a minimum of nine months of the year, notwithstanding its use for short-term rentals to visitors,” said Mr. Ingraham.
“For such a concession, we might require that such residences become subject to the payment of an occupancy tax when occupied by persons other than their owners or members of their immediate family in line with the occupancy room tax paid by hotels.”
Mr. Ingraham believed many things can be accomplished to the mutual benefit of the Bahamas government and its interest in safeguarding its revenue base, and the Bahamas Real Estate Association with an interest in increasing clients.