The Bahamas Can Significantly Increase Its Property Tax Revenue By Adopting Advanced Tax Compliance Measures Targeting Foreign Property Owners

Strengthening the Tax Net: Advanced Strategies for Capturing Property Tax Revenue from Foreign Property Owners in the Bahamas, Including High-Profile Individuals

 

By Dr. Kevin J. Turnquest-Alcena 
Nassau, NP, The Bahamas

 

“Deo adjuvante, non timendum.”

“With God as My Helper, I have nothing to fear

 

Introduction

The Bahamas has made progress in enhancing tax compliance, particularly concerning property taxes for foreign property owners.  However, enforcement challenges persist, especially with high-profile individuals such as celebrities, who often own valuable properties in the Family Islands.  By leveraging technology, automated systems, and implementing strategic legislation, the Bahamian government can further enhance its revenue collection while minimizing administrative burdens.

This article explores innovative strategies to improve tax collection from foreign property owners, with a focus on high-profile individuals, based on proven international best practices.

Current Strategies and Challenges

• Property Tax Enforcement: Foreign nationals are required to pay property taxes on their Bahamian properties.  However, enforcement remains weak, particularly in the Family Islands, due to challenges in identifying foreign owners and auditing underreported properties.

• Digitalization and Automation: Digital tax platforms have simplified the registration and payment processes for property taxes.  However, challenges persist in identifying unregistered or underreported foreign-owned properties, especially in the Family Islands where tax records are often incomplete.

Proposed Strategies for Enhanced Tax Compliance: Celebrity and High-Profile Property Owners

1. Pre-Landing Automated Tax Declaration for Foreign Property Owners and Celebrities

High-profile individuals, including celebrities, should be required to complete a digital pre-landing tax declaration before entering The Bahamas.  This system would flag property ownership and require declarations of rental or timeshare income.

Evidence-Based Approach: Countries like Australia have successfully implemented similar pre-arrival tax declaration systems, which ensure that foreign property owners fulfill their tax obligations prior to arrival.

2. Time-Share and Rental Income Verification

The Bahamas could collaborate with real estate agents, property management firms, and platforms like Airbnb to track rental and timeshare income.  The collected data could be automatically submitted to the Inland Revenue Department (IRD), cross-referenced with ownership records, and taxed appropriately.

Evidence-Based Approach: Spain has successfully partnered with short-term rental platforms like Airbnb, mandating that rental data be shared with tax authorities to ensure compliance.

3. Post-Landing Verification and Tax Payment System

Upon arrival, foreign property owners, particularly high-profile individuals, should be prompted by immigration officials to verify whether they have declared all rental or timeshare income and paid relevant property taxes.  Non-compliance should result in financial penalties and restrictions on property-related activities, such as selling or leasing.

Evidence-Based Approach: The United States' Internal Revenue Service (IRS) works with the Department of Homeland Security to track foreign investors' income earned from U.S. properties, ensuring tax compliance through cross-agency collaboration.

4. Automated Flight Plan and Property Ownership Linkage

The Bahamas could link flight plans and property ownership records to automatically detect any property associated with high-profile travelers.  This would trigger notifications for undeclared or unpaid property taxes.

Evidence-Based Approach: The UK’s HM Revenue & Customs (HMRC) uses real-time flight data to track high-net-worth individuals and ensure compliance with tax obligations related to overseas property investments.

5. Mandatory Property Code Registration and Tax Documentation

Assigning a unique Property Identification Number (PIN) to each foreign-owned property would help monitor transactions, including timeshares, rentals, and sales.  This would facilitate tracking and enforcing tax compliance for property-related activities.

Evidence-Based Approach: Canada has implemented mandatory registration of foreign-owned properties with unique property identification numbers, resulting in a significant reduction in tax evasion.

6. Collaborative Efforts with Private Jet and Yacht Charter Companies

Many high-net-worth individuals travel to The Bahamas by private jet or yacht.  The Bahamas could require private jet and yacht charter companies to share passenger data with immigration officials, which would then be cross-referenced with property ownership records.

This would trigger automated tax notifications for undeclared property income, such as rentals or timeshares.  Evidence-Based Approach: The European Union’s Passenger Name Record (PNR) Directive mandates that transportation companies share passenger data with tax authorities, ensuring that high-net-worth individuals comply with tax regulations.

7. Real-Time Rental Income Tracking and Automated Notifications

The Bahamas should partner with digital platforms like Airbnb and local property managers to implement real-time rental income tracking.  Automated systems could send notifications to foreign property owners, reminding them of their tax obligations whenever their property is rented, ensuring timely payment of taxes.

Evidence-Based Approach: The OECD has published several case studies on how governments can collaborate with digital platforms to track rental income and improve tax compliance.

Conclusion

By adopting advanced tax compliance measures targeting foreign property owners, particularly high-profile individuals, the Bahamas can significantly increase its property tax revenue. Implementing pre-landing and post-landing tax declaration systems, real-time rental income tracking, and flight data linkages will streamline tax collection and close existing loopholes.

Drawing from international best practices in countries such as Australia, Spain, and the United Kingdom, The Bahamas can create a more efficient and equitable tax system, ensuring that foreign property owners contribute fairly to the Bahamian economy.

References

1. FIRB. (2020). Foreign Investment Review Board Annual Report. Australia Government.

2. Spain’s New Tax Rules for Holiday Rentals. (2020). Spanish Property Insight.

3. IRS. (2020). Tax Guide for Foreign Investors. U.S. Government Publishing Office.

4. HMRC. (2019). High-Net-Worth Individuals Compliance Overview. United Kingdom: HM Revenue & Customs.

5. Canada Mortgage and Housing Corporation (CMHC). (2021). Foreign Ownership of Canadian Property: Trends and Compliance.

6. European Commission. (2016). Passenger Name Record Directive.

7. OECD. (2021). International Framework for the Digital Economy.  OECD Publishing.

Source

Value added tax (VAT) and Debt Collection

 

Debt Collection Expert Speaks Out Regarding VAT and Debt Collection

 

 

Rory Higgs

There has been a lot of talk throughout the Bahamas recently regarding the implementation of VAT and the collection of taxes. While for the most part the talk and views expressed are from respected individuals who are experts in their respective fields, none of the persons can claim to be experts in the field of “debt collection” in general or “debt collection in the Bahamas” in particular.

Apex Management Services has been in business for over 15 years and is the only debt collection agency in the Bahamas that is capable of handling the full spectrum of debt collection with state of the art technology and resources that are all under one roof.

While there are several debt collection options that include; In-house Collectors, Internal or External Attorneys, Internal Call Centers, External Call Centers and Offshore Call Centers, none of the options are as efficient and effective as a Local Full-Fledged Debt Collection Agency, which can handle matters from start to finish without gaps. 

Some of the inherent flaws that are associated with the various collection options that often substitute for Debt Collection Agencies are as follows:

Internal Attorneys at best would function similar to an external attorney with the difference being that they would be more accessible. At worst an Internal Attorney would also have a focus on other duties, which would diminish the attorney’s role as a specialist with 100% focus on debt collection. Although Day Court is an option, as a matter of convenience, many civil matters, which fall in the Magistrate Courts jurisdiction, are heard in evening court, which would often necessitate odd hour for an internal attorney.

External Attorneys do not operate debt collection agencies; in many instances their main focus is to obtain judgment with little if any interaction with the debtor. Prior to obtaining judgment and after judgment is obtained; attorneys do not have the capacity to provide the care and attention to each and every individual account. In most cases attorneys will bill the client after judgment is obtained and the client is still left to collect the amount of the claim.  Many matters handed to attorneys go uncollected long after the attorneys have been paid.

Onshore Call Centers are on the opposite end of the spectrum from Attorneys, in the debt collection process. While Onshore Call centers are extremely good at interacting with debtors, they have no enforcement capabilities. If a call center operator is dealing with a debtor who is not cooperating or refuses to pay, the call center has no recourse but to send the debt back to the client who will most likely send it to an attorney thus creating a time and process gap, when time is of the essence.

Furthermore Call Centers have no capabilities to locate debtors whose whereabouts are unknown (Skip Trace) even though a large percentage of bad debt matters require Skip Tracing. At best, Call Centers are only suitable for early stage debt not late stage debt.

Offshore Call Centers have the same disadvantages as Onshore Call Centers plus the following added disadvantages.

Communication and Culture - In most cases Offshore Call Centers operate in countries where there are cultural differences that are often subtle but significant. This is compounded when English is not the native language or where patois is predominant.

Geography – Psychologically if a debtor senses that there is some significant distance between the call center operator and themselves they are less likely to cooperate or pay.

Speaking from experience gained working with a major commercial bank that implemented an offshore call center option that failed miserably, Offshore call centers or Offshore Collection Agencies do not work.

The differences that a properly equipped and professional Debt Collection Agency such as Apex makes to the collection process that none of the above options can provide are as follows:

•          Principal has over 30 years of Credit and Collection Experience.

•          Principal is an accomplished Fellow and Member of the largest International Debt Collection Trade Association. ACA International, the Association of Credit and Collection Professionals.

•          Agency has been in operation for over 15 years

•          Easily accessible well-maintained and spacious offices conducive for customer service.

•          Adequate telecommunication technology and operators to handle thousands of calls daily.

•         Auto-dialers, which exponentially increase the calling and communication capacity of the call center.

•         SMS technology which exponentially increases the communication capacity of the call center.

•          State of the art Collection Management Software capable of handling unlimited number of accounts with integrated financial accounting, diary management and many additional features.

•          State of the art Legal Case Management Software

•          24/7 client web access

•          Skip Tracing Database and Skip Trace Network

•          In House Attorneys that are 100% dedicated to debt-collection-litigation.

“International financial institutions, such as the World Bank and International Monetary Fund (IMF), have propagated a conventional wisdom that revenue collection authorities are more effective when they operate autonomously from the state, as a commercialized entity at arms length from government rather than as a department within the government administration”.  (Source: Preconditions for Effective Tax Collection, By – Economic Policy Research Unit, Bergen Norway)

A growing number of U.S. states are expanding their relationships with private collection agencies to settle long-overdue taxes.

Her Majesty Revenue & Collection (HMRC) has outsourced some of its debt collection to external agents. Following a pilot, a notice entitled ‘Modernizing debt collection’ was released explaining that four debt collection agencies will be employed by HMRC to collect an outstanding £140 million of outstanding tax debt. (Source: HMRC sends in debt collectors for unpaid taxes. By-Nick Lodge, Director of debt management and banking HMRC.)

In Spain alone more than 800 companies specialize in collection of outstanding debt, handling a total of 71 billion euro and generating close to 560 million euro for their business. (Source: DBK, “Empresas de Gestion de Impagados)

With an obvious eye on an opportunity to capitalize on the existing situation, a number of over-night debt collection vendors are beginning to surface without any experience or capacity to perform at a level that would be required.

It would be a shame if we as a country succumb to the temptation to award debt collection contracts based on patronage rather than on merit, at such a time when our country’s financial wellbeing is at stake.

March 28, 2014

Media Contact: Rory Higgs  
Phone: 424-0985 (Cell)

Email: rhiggs@apexbahamas.com