The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An ex-deputy prime minister yesterday likened the blanket five-year renewal of all tax breaks under the City of Nassau Revitalisation Act as akin to “the definition of insanity”.

K Peter Turnquest, in his Budget debate contribution in the House of Assembly, effectively charged that the government is doing the same thing over and over again, yet expecting different results, even though there is no evidence that legislation first enacted by the last Ingraham administration more than one decade ago is having the desired effect.

The government, in the multiple Bills accompanying the 2021-2022 budget, is planning to extend the Act and all its investment incentives for a further five-year period until end-June 2026, but Mr Turnquest called for a more nuanced approach that ties these tax breaks to action and timelines by downtown and Bay Street landlords to improve their properties.

“This Revitalisation Act has yet to produce a positive tangible result on Bay Street, particularly east of East Street. I remind us of the definition of insanity. Truthfully, without an incentive and a concession tied to an action, nothing will happen seemingly, and these properties will be passed from generation to generation in their current condition, which is unhelpful to the city of Nassau,” Mr Turnquest, also the former finance minister, argued.

“I propose for consideration a carrot and stick approach. Grant the extension of concessions for one year, two maximum if you feel so pressed upon, and if development happens extend it for the full five years proposed on an application basis. If it does not happen in a year or two, the concession falls away and the full tax becomes due retroactive to July 1, 2021.

“With New Providence responsible for approximately 85 percent of GDP today, how do we continue to afford this without economic activity to compensate for it?” The City of Nassau Revitalisation Act offers import duty, Excise Tax, VAT and real property tax incentives to property owners in the downtown area.

Charles Klonaris, the Downtown Nassau Partnership’s (DNP) co-chair recently hailed the five-year tax break extension for giving investors certainty and helping to “distinguish” Nassau’s city from other areas. He added that it was “such a huge benefit” to reducing the payback period for when entrepreneurs will see a return on their property upgrades.

“We’ve been working on that for some time, and it’s key they [the government] keep extending it,” he argued. “The government has been very accommodating with the revitalisation of the city. It’s so critical. It encourages investment. We welcome that. It’s such a huge benefit.

“When we do something, whether we get the traffic or not, it’s still a very expensive proposition to renovate, upgrade or do any building. You need a minimum of five years to at least see the benefits of your investment. It [the Act] shortens the return period, which is really so critical. If you don’t have that, you will be looking at a minimum of ten to 12 years depending on how successful the traffic flow is.”

Mr Klonaris said himself and his brothers would not have constructed their multi-million dollar plaza, Elizabeth on Bay, at the corner of Elizabeth and Bay Streets, without the various tax breaks offered by an Act that was intended to incentivise property owners to enhance, repair and upgrade their properties to improve the appearance of downtown Bay Street and surrounding areas.

Elsewhere, Mr Turnquest voiced misgivings that changes to the VAT Act, intended to capture rental income generated by vacation rental properties as well as commissions, “seems to possibly create some mischief with export services such as those performed at BORCO and Statoil.

“It may also bring the cruise lines within its ambit in respect to on board sales while in port. I would be grateful for the legal interpretation of this concern so that I might be disabused of my view,” he added. Blending activities at Statoil and BORCO have previously caused VAT-related controversy over whether they are an export activity, and should thus be zero-rated, or if this is a “value-added” activity in the domestic economy.

Mr Turnquest also warned that reforms to the Excise Tax Act, as currently written, could be interpreted as allowing existing small and medium-sized enterprises (SMEs) with annual sales under $5m

“I do not think this was the intention of the Government, which as I understand it was a one-time concession for new start-ups. If I am accurate, I believe an amendment is necessary,” he added. “I encourage the minister to look at that as it could be a real problem.”