The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company (BTC) has demanded a full percentage point cut in Communications Fee rates, warning that the Government’s grab for surplus regulatory revenues has “diminished goodwill” in the sector.

Pauline Seymour, BTC’s vice-president of legal and regulatory affairs, said last year’s amendment to the Utilities Regulation and Competition Authority (URCA) Act had already resulted in a $1.16 million wealth transfer from industry operators to the Government.

This is because the URCA (Amendment) Act 2013 now requires URCA to transfer surplus funds to the Government’s consolidated fund at year-end, rather than returning these monies to the communications companies that initially paid them.

Ms Seymour and BTC, in a February 3, 2014, letter to URCA branded the revenue grab by the Government, their 49 per cent minority shareholder, as “unfortunate and unnecessary” since it added to the sector’s growing tax burden.

They were backed by their main domestic rival, Cable Bahamas, which criticised URCA for failing to inform the industry about the Government’s plans to seize the surplus regulatory fees.

Suggesting that the episode raised questions about whether URCA was truly independent from the Government, the BISX-listed provider said the Act’s amendment was tantamount to a breach of trust and “taxation without representation”.

BTC, meanwhile, told URCA in its response to the latter’s 2014 annual plan that it had “serious concern” about the Bahamian communications industry’s increased taxation burden.

Apart from Business Licence fee rises, the sector was also having to content with higher communication fees, with BTC fearing that the collective impact will be to “stifle growth” and investment in the industry.

Calling on URCA to reverse a proposed increase in its own fee rates, which are this year slated to rise from 1.076 per cent of a licensee’s gross revenues to 1.368 per cent, BTC called on the authorities to compensate for the increased burden.

It suggested that the separate Communications Fee, which is paid to the Government, be cut from 3 per cent of gross revenues to 2 per cent, arguing that this would stimulate greater competition and counteract the Christie administration’s surplus fee grab.

“The increased taxation on the industry is cause for serious concern for BTC,” Ms Seymour wrote on its behalf. “URCA and the central government should revisit the issues of fees, as they have the potential to stifle growth of the telecommunications industry.”

BTC said the Business Licence fee rise had created an “increased burden” by itself, and the carrier urged URCA to reconsider its own increases given the “overwhelming” tax demands placed upon the sector.

URCA is planning a $540,000 year-over-year increase in its proposed 2014 budget, which it says is necessary to handle the demands that will be created by cellular market liberalisation and Value-Added Tax (VAT) related cost increases.

Yet Ms Seymour, on BTC’s behalf, added: “Operators are conducting business in one of the most heavily taxed environments in the world.

“BTC is disappointed in the proposed increase in fees in circumstances in which operators are already faced with hefty Communications Fees, Business Licence fees, Operating fees and Spectrum Licence charges.

“The continued increase in fees has the potential of stemming growth in the sector. The cost of participating in the telecommunications industry already appears to be prohibitive and can act as a deterrent to the promotion of competition, as seen by the sluggish growth in the number of operators entering the market.”

Then, turning to last year’s legislative changes, Ms Seymour wrote: “BTC is of the view that the URCA (Amendment) Act 2013 has had the effect of diminishing the goodwill between operators, and URCA and the Minister with responsibility for that authority.

“The requirement for URCA to transfer surplus to the centralised Consolidated Fund has resulted in operators being deprived of the funds that would ordinarily have been returned to them after URCA had expended funds in accordance with its budget.

“The amendment has effectively prevented the $1.16 million income in the Electronic Communications Fund for 2012 from being refunded to licensees as originally mandated by the Act, in effect offsetting the fees charged or 2013,” Ms Seymour said.

“The transfer of these funds to the Consolidated Fund is unfortunate and unnecessary. BTC calls on URCA and the Minister with responsibility for the Authority to reduce the annual fees so that the sector may remain attractive to investors and to ensure operator viability.”

BTC and Cable Bahamas, for once, are singing from the same hymn sheet when it comes to the URCA (Amendment) Act 2013.

Judith Smith, the BISX-listed operator’s in-house legal counsel, in its feedback on URCA’s annual plan, wrote that it was “certainly concerned” about the Government’s revenue grab.

She added that the industry had paid fees to URCA for four years on the basis that they would not be paid into the Consolidated Fund, and that any surplus would be carried over into future years - thereby lowering taxation rates.

“Therefore, on July 31, 2013, this unannounced and ceremonial confiscation of surplus to the Consolidated Fund amounted to a breach of the trust and legitimate expectation of stakeholders, and taxation without representation,” Ms Smith said on Cable Bahamas’ behalf.

“It would appear that URCA was remiss in asserting its independence and appropriately challenging the implementation of the new law....... It is our preference that our investment is in the provision of services and reasonable prices to consumers.”