Please ignore BREA and raise property taxes

Dear Editor,

I am, among other things, a real estate attorney.

As such, I work with realtors every day.

Like many realtors, I make money from high-end property sales involving mostly foreigners.

Like them, I understand (although I do not overstate) the role that the high-end real estate market plays in our economy.

Nor do I not fault realtors their right (like everyone else’s) to speak collectively to their economic interests.

But when a group of realtors tells you that the IMF is too left-leaning in its approach to taxation on luxury properties, it is time to consider whether short-sighted and narrow self-interest is getting the better of objective judgment, common sense and patriotism.

The economic arguments in favor of low taxes on luxury property are senseless in the extreme.

Firstly, nobody comes to The Bahamas to buy property because it is cheap.

Nothing in The Bahamas is cheap, and luxury properties are certainly no exception.

By what logic should the taxes on an inherently expensive (hence ‘luxury’) item be concessionary?

Secondly, Americans, Canadians and Europeans are quite accustomed to high (and strongly enforced) property taxes on high-end real estate.

In my practice, I am frequently pestered by Canadian clients who are unable to get prompt tax bills sent out and fear (wrongly, as it is) that their property will be seized for non-payment.

Because of a lack of enforcement, there are, at present, hundreds of foreign-owned luxury properties around The Bahamas with delinquent tax bills, which are effectively frozen out of the market because the owner adds the cost of the outstanding tax to their asking price, alienating them both from potential buyers and from tax income.

In any sane jurisdiction (like those most buyers call home) these properties would be seized and sold for tax to new buyers, keeping the luxury property market energized and taxes coming in.

Now any student of Bahamian history knows that our elites have traditionally been masters of self-harming economic illogic (like the retailers who fight tooth and nail against higher wages, which will end up in the pockets of their customers and ultimately themselves).

But even if there was some short-term economic benefit to low taxes on luxury real estate, such benefit would only accrue to a narrow segment of the population – people like myself and high-end realtors.

Meanwhile, the cost of running this country would continue to be disproportionately placed upon the poor, who ultimately pay for discounted taxes on wealth and property.

The Bahamas, today, is a place where taxes on consumption (which, by definition, affect the poor disproportionately) are high and rising, while taxes on income are non-existent and taxes on luxury property are absurdly low and unenforced.

The result is one of the most unequal societies in the Americas, while spending (contrary to a widespread misperception) is pitifully low by comparison to our wealth.

This is the root cause of crime and every other social emergency that we face.

Economically, it is both unsustainable and utterly senseless.

Even the IMF can see that.

– Andrew Allen

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