The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Freeport businesses are aiming to bring a Judicial Review challenge to the Government’s new and increased taxes, Tribune Business was told yesterday, their proposed action having received the Grand Bahama Port Authority’s blessing.

Barry Malcolm, the Grand Bahama Chamber of Commerce’s president, confirmed that rather than sue the Government or Customs directly, GBPA licensees were focused on a Judicial Review of whether the new Budget fees and regulations were lawful under the Hawksbill Creek Agreement (HCA).

Warning that Freeport would incur “enormous costs” if the new fee/tax structure is left in place, Mr Malcolm said: “The fundamental question is whether or not these types of tax should be, or could be, legally levied in Freeport given the constraints of the Hawksbill Creek Agreement.

“The preferred approach of Chamber members is to seek Judicial Review and see whether the actions taken are consistent with the requirements set out in the Hawksbill Creek Agreement.”

The GBPA’s 3,500 licensees believe Freeport’s supposed status as a ‘free trade zone’ is under attack from the 2013-2014 Budget’s new and increased taxes.

Of particular concern are the 1 per cent Customs administrative processing fee which, given Freeport’s industrial economy and volume of container imports/exports, is set to dramatically increase companies’ costs.

“Many of those companies have, or are making, individual responses to the Customs Department in Freeport, but they’ve asked that the Chamber and Port Authority step forward to have those matters aired and considered by the powers that be,” Mr Malcolm said.

The ‘Environmental Levy’ and other fees will also likely come under scrutiny in the Judicial Review action, which will be led by Fred Smith QC and Callenders & Co.

The Grand Bahama Chamber is trying to secure the support of as many businesses and GBPA licensees as possible, and Tribune Business understands that the Port Authority itself also gave its backing at a July 23 meeting.

Mr Malcolm would not confirm this, and Tribune Business understands that the GBPA is constrained by the Hawksbill Creek Agreement from engaging in open disputes with the Government.

Any dispute between the two is automatically sent to arbitration, and this prevents the GBPA from joining the Chamber and licensees as a party in the proposed Judicial Review action. It is understood that whether to add the GBPA as a ‘friendly’ defendant is being mulled.

Mr Malcolm, meanwhile, said the Chamber had engaged in extensive consultation with its members “at all levels” over how it should respond to the new tax structure imposed on Freeport.

“All of them have asked for a considered response by the Chamber,” Mr Malcolm said. “The view has been pretty consistent across the members irrespective of size of balance sheet.”

He added that the major concerns were the impact the tax changes would have on business, coupled with the fact there was “zero consultation” and “no consideration given to the impact on Freeport under the Hawksbill Creek Agreement”.

“Freeport is not asking for special treatment,” Mr Malcolm told Tribune Business, “but there is a structured core under the Hawksbill Creek Agreement that lays out how business ought to be treated tax-wise.”

Suggesting that the new ‘fees’ were taxes in anything but name, Mr Malcolm said they would have a “significant and detrimental impact on the conduct of business in Freeport”.

“The cost to Freeport is enormous,” he added. “I would say that if left to stand, these taxes would have a very, very serious dampening effect on the ease of doing business, the cost of doing business in Freeport.

“This will be one additional bit of weight put on Freeport, and its ability to conduct business. It’s a real concern.”

Mr Malcolm said the Chamber planned to consult with its entire 400-strong membership, having met with 100 already. And it plans to convene a forum of its full membership within 60 days, and invite government officials to hear - and understand - the impact the new taxes are having on Freeport.

Tribune Business understands that the Chamber is still awaiting confirmation as to whether Michael Halkitis, minister of state for finance, will “be available”.

Mr Halkitis said the new fees are intended to cover the costs of Customs and other government operations in Freeport, but many licensees feel it is motivated by the Government’s belief it needs to earn more revenue from the second city.