A leading businessman and civic leader yesterday charged that the prime minister’s recent pledge to provide construction concessions for first-time homeowners would be very difficult to manage and fraught with fraud and corruption if it’s not properly thought through by all stakeholders.
During a rally on Friday, Prime Minister Dr. Hubert Minnis said if he is given a second term in office a Free National Movement (FNM) government would commit to removing taxes and duty on building materials, furniture and large and small appliances for all first-time Bahamian homeowners constructing an owner-occupied dwelling [valued] at $300,000 or less.
CEO of Caribbean Group Bahamas Robert Myers, who is also the head of the Organization for Responsible Governance (ORG) and has also served as president of the Bahamas Contractors Association, said while homeownership should be a significant objective for all governments, this particular incentive would create a plethora of issues.
“I can assure you that this incentive will be very difficult to manage and fraught with fraud and corruption if it’s not properly thought through by all stakeholders and managed accordingly,” he told Guardian Business yesterday.
“And one thing is for sure, it will not improve the ease of doing business.”
Regarding the removal of duties, Myers questioned, “If a builder/contractor is building these homes then who applies for the duty free concession and how will the Customs Department track what materials are being imported for what home? Assumably, a builder/contractor could be building multiple homes throughout the island, not all of which would benefit from this incentive, so how then will Customs determine what materials are for what job?
“To make it more complicated, what happens when a contractor ships multiple materials on one shipping trailer for multiple jobs? You will likely have incidents where a shipment contains two bundles of plywood on a bill of lading, but only 30 pieces may be for duty free homes. This incentive will open the door to a tremendous amount of fraud and Customs corruption.”
The ORG principal pointed out that neither the Progressive Liberal Party (PLP) nor FNM governments properly established the Construction Contracting Board and required committees and licensing requirements, noted within the Construction Contracting Act.
As a result, Myers said there is still no accountability or control within the construction industry, and as such, there are all kinds of unscrupulous builder/contractor in the country that will abuse this incentive and continue to run amuck.
“The next government simply must do what is required to clean up the construction industry for the benefit of the consumer and equitable enforcement of the rule of law,” he said.
“Many builder/contractors buy their materials on island from reputable hardware, lumber, appliance and tile retailers etc. How will the government treat the duty paid by these retailers on materials sold to a duty free home? If there is no means for the retailers to obtain duty credits on such materials sold, then this government stimulus will have inadvertently negatively impacted local retail and retail jobs and forced sales to foreign retailers. We trust this is not the government’s intent. How will local retailers know if materials sold to a builder/contractor or homeowner are for duty free homes?”
Myers said the incentive has a whole other set of challenges with regard to the removal of value added tax (VAT).
“VAT concessions are a nightmare to track, due to the nature of the VAT inputs and outputs, for much the same reasons mentioned in item one above it will be very difficult for builder/contractors to deal with this concession. Builder/contractors, with TIN numbers, will now have to apply VAT to some jobs and not others, and God help them if they are audited by Inland Revenue and have to match invoices, bank statements and thousands of VAT receipts to prove their VAT payments or lack thereof on VAT free homes,” he said.
“How will local retailers, suppliers and merchants know if materials, services or supplies sold to a builder/contractor or homeowner are for a VAT free home? Will the VAT exemption apply to homeowners insurance, contractors all risk insurance, bank charges, legal fees, architectural fees, engineering fees, building permits etc., all of which are related to building the home?”
Nonetheless, Myers said the intention behind the incentive is good given that homeownership lends to a stronger economy.
“This objective is targeted at low income homes, at least based on the $300,000 threshold, and is a positive action that will make it a lot less expensive for those building a 2000 square foot home or less to afford and build their own home,” he said.
“Home ownership should be a significant objective for all governments, as people who aspire to own their own homes, or own their own homes, are typically going to be stable members of the community, have greater savings, be proud of their communities and surroundings and be dedicated to earning a stable income. All in all, increased home ownership creates better communities, pride, stability and growth for the nation.”