BREA President Christine Wallace-Whitfield seeks meeting with Finance Minister to
‘work together to stimulate economy.’
‘Bahamas will always have appeal but costs influence decisions’
The president of the Bahamas Real Estate Association said today the nearly 700-member organization has high hopes for a positive meeting with Minister of Finance Peter Turnquest to clarify increases in Value Added Tax and Real Property Tax that could impact the housing market for both local and international buyers.
“We have requested a meeting and are very hopeful that the Minister of Finance will accommodate our request as soon as possible particularly given the impending deadline of July 1st which is fast approaching,” said Christine Wallace-Whitfield who was re-elected president of the powerful organization based on a platform of closer communication and consultation with government. “Our phones are literally ringing off the hook with questions and we want to seek clarification as well as requesting a gradual implementation of certain terms, particularly as they affect the new VAT rate on legal fees and agent commissions and changes in the Real Property Tax for non-Bahamians.”
The meeting request follows unveiling of the 2018-2019 budget that includes a 40% increase in VAT across the board for goods and services. That hike from 7.5% to 12% will affect closing costs yielding increases to the cost of legal fees and real estate commissions, both of which are subject to VAT. The Government has advised that it needed to raise additional revenue to close the gap between debt service and Gross Domestic Product. International authorities advise that a developed economy can afford up to a 60% debt-to-GDP ratio, an emerging or developing country 40%. The Bahamas debt-to-GDP is approaching 70% and the government has said it is aiming for a balanced budget in three years.
“We fully appreciate the need to raise additional revenue as the government moves toward a more stable financial position,” said Wallace-Whitfield. “We have also asked the government to respect the need to make home ownership affordable and to continue to attract second homeowners. BREA recognizes that there is always room for compromise. Accordingly, BREA has accepted the increase from $500,000 to $750,000 minimum investment for residency for those who qualify. As such we are seeking to discuss a proposal for a gradual, rather than sudden implementation, of certain aspects of Real Property Tax changes and a delay in the implementation of the increase in VAT rates, terms and conditions for sales or developments currently under contract or underway.”
According to Wallace-Whitfield, it is important for The Bahamas not to be perceived as a jurisdiction that changes business terms mid-stream.
“The Bahamas is seeking to retain a very special place in the global market, however costs do influence behavior and can impact our ability to remain competitive,” she said. “While developments that are still in the planning stages have time to amend their business plans, projects that are underway that were built to sell at a certain price point may not have the same price flexibility. BREA is faced with twin concerns, which includes an increase of VAT on fees associated with a purchase in addition to an increase in percentage of Real Property Tax from 1.5% to 2% above $500,000 (which also includes a removal of a $50,000 cap). BREA is desirous of meeting with the government in an amicable atmosphere in order to derive a mutual position in an effort to stimulate growth, which in the final analysis is the best way forward for a productive real estate industry and a financially healthy nation. “