Bahamas Ponders Action On Real Estate Sector

by Jason Gorringe, Tax-News.com, London

02 September 2004

Leader of the Bahamas Opposition Party, Tommy Turnquest, said recently that "relief from real property tax on the first year of ownership of a self-occupied second home in the Bahamas" might be considered as a potential concession in making the the Bahamas more attractive as a retirement destination.

Reflecting current concerns in the Bahamas over inflitration of the economy from abroad, Mr Turnquest said: "We have to be very clear in our promotion and in our approval process that we are seeking second home owners who do not wish to compete in the local economy with existing Bahamian businesses." Turnquest also talked about the sensitive issue of employment of non-Bahamians.

Both Mr Turnquest's party, the Free National Movement, and the governing Progressive Liberal Party agree that the Bahamas Real Estate Association (BREA) should be a key partner along with the Government in promoting the Bahamas not only as a retirement destination, but also as a location for the purchase of a second home.

In July, BREA president Pat Strachan remarked that he wished to "eliminate the unfair competition we are faced with from unlicensed foreign agents", observing that much of the problem stems from real estate agents originating in the United States, particularly Florida, "who are allowed to enter the Bahamas, get in cahoots with Bahamian lawyers to solicit listings and then sell Bahamian real estate."

Mr Turnquest also expressed concerns about the potential impact of the Tax Information Exchange Agreement between the Bahamas and the US on the willingness of US citizens to acquire second homes in the Bahamas, and in August Minister of State for Finance James Smith said: “Until we have a level playing field with regard to tax information exchange we are not entering into any treaties with other OECD members".

The recent TIEA entered into with the United States has sparked worry in the financial community that the Bahamas has left itself at the mercy of the IRS. The criminal element of the US TIEA came into effect on January 1, giving the Bahamas the status of a permanent US Qualified Jurisdiction, but civil tax matters will be covered by the TIEA from January 1, 2006.

Bahamian academic Dr Gilbert Morris, executive director of the Bahamian Landfall Centre for Finance, Trade and International Affairs, while no friend of the TIEA, has expressed concern that the level of foreign ownership in the country’s banking sector is holding back Bahamian participation in the real estate sector. Dr Morris has urged the government and the banking sector to develop more imaginative financial products, such as real estate investment trusts (REITs) to help alleviate the jurisdiction’s housing problem and make buying property more affordable for locals.

“Today in Dubai, a sandy place in the desert, they are building 5,208 buildings and all of them are being funded by Real Estate Investment Trusts (REIT) created by Dubai bankers,’ he observed in August. Dr Morris expressed the view that if Bahamian bankers had greater control and ownership of the banking sector, similar instruments could be created in tandem with the capital markets, thus spreading risk and making home ownership more affordable for Bahamians.

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