The Tribune

By NEIL HARTNELL

Tribune Business Editor

A LEADING QC has questioned the Government's sanity in allowing Customs to further attack Freeport's 'bonded goods' economy, arguing that their latest actions risked taking the Bahamas' second city back to the "wasteland and ghetto" it was in the 1970s.

Fred Smith QC, the Callender's & Co attorney and partner, described Customs' new practice of effectively telling Grand Bahama Port Authority (GBPA) licensees what goods they could buy bonded as "demented".

He suggested this latest deprivation would further encourage entrepreneurs, both Bahamian and foreign, to leave Freeport's struggling economy.

And Gladys Smith, Mr Smith's sister and a GBPA licensee and small business owner, told Tribune Business that Customs' latest move would ultimately be counter-productive to the Government itself, in terms of tax revenues collected.

Ms Smith said that if GBPA licensees such as herself were unable to obtain their annual 'over-the-counter bonded' goods letters from Bahamas Customs, entitling them to purchase goods for use in their own business 'duty free', they would merely resort to importing the necessary materials directly from Florida.

This, she explained, would represent a wealth transfer from Bahamian to Florida merchants, with all the attendant consequences such as income and employment losses for Freeport businesses, not to mention the extra drain on this nation's foreign exchange reserves. The reduction in economic activity in Freeport would also lead to reduced taxes for the Government, hence the self-defeating nature of Customs' move.

"It's pretty pathetic the way things are now," Ms Smith, who owns Diamonds by the Sea, a vacation rentals provider, told Tribune Business. "They're [Customs] trying to discourage people so much that they just pay the duty at the end of the day."

Tribune Business revealed last week how numerous GBPA licensees were complaining about Customs refusing to renew their annual 'over-the-counter' bond letters, which allow these companies to purchase goods for use in their own businesses duty-free.

Sources close to the matter told Tribune Business that Customs was refusing to renew these letters unless GBPA licensees provided it with records of all 'bonded goods' (duty free) purchases made in the past year.

This newspaper was told that there is nothing in the Hawksbill Creek Agreement or any other Bahamian law that permits Customs to link the two issues together and do this, but sources said those licensees unable to obtain the letter were being told by Customs to seek its approval for each individual 'bonded good' purchase they wanted to make.

And, in doing the latter, Customs was effectively trying to make life as difficult as possible for GBPA licensees, telling them which goods they could/could not purchase bonded, and requiring them to bring quotes or estimates before individual purchases were approved.

"They want you to be driving around all day seeking their approval," Ms Smith said. 'It's my company, and I should not be doing that. The idea of this bond is to provide incentives for people to invest, but all it's doing is creating hassle and aggravation."

Explaining the nature of her Diamonds by the Sea company, which has developed five acres of beachfront land since obtaining it from the GBPA some 20 years ago, Ms Smith said: "I have vacation rentals, and people come in on a regular, weekly basis, so we always need to refurbish, renovate and redevelop. We do need to get these things bonded."

But, without an approved 'over-the-counter' bonded letter from Bahamas Customs as yet, Ms Smith said she was being forced to go to the likes of Kelly's (Freeport) and pay the full amount, inclusive of duty, which she would normally not have to pay.

"It won' stay like that, because I will bring things in from the US," she told Tribune Business. "It's going to be detrimental to the businesses here that sell retail. If I have to buy it from the US and bring it in on a container, as a bonded company, that's what we'll do, even if I have to consolidate with other people."

Acknowledging that this could lead to massive income outflows from the Bahamas if other GBPA licensees followed suit, Ms Smith said: "I guess they [Customs and the Government] don't see it that way. But if I'm not buying over-the-counter, I'll bring it in from the US."

Mr Smith, meanwhile, described Customs' latest initiatives as "totally messed up", adding that they were in danger of sending Freeport's annual $70-$120 million bonded economy to the wall.

Describing his sister's business as the sort of small business that typically sustained an economy, Mr Smith said: "Customs are making a decision as to what people can and can't buy bonded. They're totally messed up.

"It's just, in my view, going to continue to dissuade and discourage investors and residents from continuing to be part of the Freeport economy. People ultimately are going to get sick enough to pull their tents up and leave."

If this happened, Mr Smith said, Freeport could easily go back to the days when it was a sleepy economic back water, after the late Sir Lynden Pindling's 'bend or break' speech sent thousands of foreign investors fleeing.

"It will become a wasteland and ghetto like it was in the 1970s, after 40,000 foreigners pulled out," the QC said of the Bahamas' second city. "Freeport was then a desert camp. If you saw three cars on the road then, it was a traffic jam.

"It's very discouraging for anyone trying to do anything here, even as a Bahamian. I am sick of Freeport. It is a sick economy, with a sick government bureaucracy, which is pursuing policies being approved by a demented government, my FNM government.

"They are mad to be doing this in an election year. Do they want everyone to vote against them? Government is in charge of Customs. They are in charge of what is being done here, and Customs is driving Freeport's economy to hit the road. People will give up and say: 'To hell with this. We'll find a business environment that actually appreciates commerce'."

From Customs and the Government's perspective, there has been a long-held suspicion that they gave away too much with the Hawksbill Creek Agreement, and that GBPA licensees are not paying their fair share in taxes.

Customs recently told Tribune Business that it believes many in Freeport are abusing the bond privileges to evade due taxes. And, given the Bahamas' fiscal position, the pressure is on from the Ministry of Finance and government to collect every cent of revenue possible.