The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Freeport contributed close to $200m in taxes and National Insurance Board (NIB) contributions pre-pandemic despite its reputation as a free-trade zone, a report by the KPMG accounting firm has projected.

The document, prepared for the Grand Bahama Port Authority’s (GBPA) Revitalisation and Economic Expansion of Freeport (REEF) committee, also estimated that the city contributed some $1.4bn to the nation’s gross domestic product (GDP) - or 10.2 percent of economic output - despite the battering it received from Hurricane Dorian.

“We estimate that for the fiscal year 2018-2019, Freeport contributed approximately $1.4bn in GDP, 10.2 percent of the total GDP of The Bahamas, and $197.1m in government receipts and NIB contributions,” the report, entitled Vision 2025: Planning for a prosperous future, said. “Further, Freeport’s five-year cumulative GDP contribution stands at an estimated $7.2bn, averaging $1.4bn for each of the last five years.

“Freeport’s gross financial contribution to the Bahamian economy, in terms of government taxes and fees, is estimated to be $153.1m plus $44m in NIB contributions. Although the provisions of the Hawksbill Creek Agreement exempt Freeport from certain taxes and fees, there are many taxes and fees that are still assessed and collected in Freeport.”

The report broke the city’s tax contribution down into $61.3m from VAT; $24m in stamp taxes; $20.9m in excise taxes; $18.4m from import duties; and $10.6m in immigration fees as the major sources of government income. The total sum collected was pegged by KPMG at slightly higher than the $143.5m generated for the Public Treasury in 2014, some five years earlier.

However, in a sign of Freeport’s economic and workforce/population stagnation, the report showed NIB contributions declining from $45m in 2014 to $44m in 2019 just prior to the start of the COVID-19 pandemic.

Pointing to Grand Bahama’s declining GDP share, the report said: “Despite a drop from 16.9 percent in 2016 to 13.8 percent in 2019, Grand Bahama has proven to be an important economic pillar contributing more to the GDP than the consolidated total of all other Family Islands in The Bahamas.

“Further we note that the onset of the reduction in GDP contribution corresponds with the October 2016 landfall of Hurricane Matthew, which inflicted significant damage on the island and resulted in the destruction of many homes and businesses, and in particular resulted in the closing of over 1,000 hotel rooms mainly at the Grand Lucayan, and the loss of associated jobs.

“Grand Bahama’s economic activity is led by construction and real estate activities, which each account for 15.2 percent of total GDP for the island. Rounding out the top four are mining and quarrying, manufacturing, electricity and gas, and water supply and sewerage, which generated 11.1 percent of Grand Bahama’s GDP, and wholesale and retail trade, motor vehicle repairs and transport and storage which generated 10.6 percent of Grand Bahama’s GDP,” the report continued.

“We note that a significant portion of the GDP contribution is derived from industries other than direct tourism, which points to the important diversity that Grand Bahama and, by extension, Freeport bring to the Bahamian economy as a whole.”