The Tribune

By NEIL HARTNELL Tribune Business Editor THE GRAND BAHAMA Chamber of Commerce's president has urged the next government to treat the extension of key Freeport tax incentives, due to expire in 2015, as "a priority" and to end the uncertainty that could stifle much-needed foreign and Bahamian investment. John Swain, who is also a Deloitte & Touche (Bahamas) accountant and partner, said the impending end to Freeport's Business Licence and real property tax exemptions needed to be resolved "as soon as possible", especially as a major foreign investor had again flagged this up as a 'material risk' to its public shareholders. New York Stock Exchange (NYSE) listed Buckeye Partners, the 100 per cent owner of the Bahamas Oil Refining Company (BORCO), in its 10-K form filed with the Securities & Exchange Commission (SEC), warned that its cash flow could be "materially adversely affected" if the Business Licence/real property tax exemptions under the Hawksbill Creek Agreement ended. "BORCO is currently exempt from Bahamian taxation. If BORCO's tax status in the Bahamas were to change, such that BORCO has more tax liability than we anticipate, our cash flow could be materially adversely affected," Buckeye Partners said. "BORCO is currently exempt from income and property tax in the Bahamas pursuant to concessions granted under the Hawksbill Creek Agreement between the Government of the Bahamas and the Grand Bahama Port Authority. "BORCO's exemption from Bahamian taxation pursuant to the Hawksbill Creek Agreement is scheduled to expire in 2015. If the Bahamian governmental authorities do not extend the concessions under the Hawksbill Creek Agreement, or BORCO's tax status in the Bahamas were to otherwise change, such that BORCO has more tax liability than we anticipate, our cash flow could be materially adversely affected." This illustrates the uncertainty currently confronting potential investors in Freeport, both Bahamian and foreign, because it is impossible to develop financial projections and business plans without the Business Licence/real property tax issue - and their associated costs - being squared away. "I think it's very important that we look at the question soon, because in terms of investors coming in that's one of the things they can benefit from," Mr Swain told Tribune Business of the 2015 expiration date. "If it's going to expire in three years it will put us at a disadvantage for investment to come in, and is something we need to look at as soon as possible." The Chamber president acknowledged that the Government, and Prime Minister Hubert Ingraham, had indicated they would look at extending the investment incentives after the upcoming general election, engaging then the Grand Bahama Port Authority (GBPA) and other stakeholders, such as the latter's several thousand licencees. "It's important they continue," Mr Swain added, "because the way Freeport is, and how it has developed, those incentives attract a lot of people to come here. Once they expire, people will look at the bottom line and worry whether they will face increasing costs. "I think they've been very valuable to Freeport and the development of this island, as it allows companies to come and not worry about real property tax for an extended period of time. They can develop large areas of property and not have take-aways from the bottom line to worry about. "As you know, all investors want the highest level of certainty they can get, and any time something is not clear or there's confusion, it increases your risk." In the case of Business Licences, if that exemption expired, Freeport licencees would face 'double taxation' in this area, as they would be paying such a fee to the Government in Nassau as well as the GBPA. Hence the need for the Government and all interested parties to resolve the '2015 issue'. Looking ahead, Mr Swain told Tribune Business: "After the election, will the new incoming government have it as a priority? I think it should be a priority, and I think they should look at resolving that as soon as they can. "Grand Bahama's economy has been severely impacted over several years now, and we don't need that to expire on us and investment slow down because investors have real property tax concerns they did not have before. All these things need dealing with and resolving, and they will hamper business if not resolved in a reasonable period of time. "The economy is turning, and I believe people will continue to invest. But they want to have a level of certainty and assurance that if they invest in Freeport, they will not have double taxation on Business Licence fees or increased real property tax, which eats into or takes away from their bottom line. It's very important to the continued development of Freeport."