The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An Opposition MP yesterday gave “wholehearted” backing to Grand Bahama Port Authority (GBPA) licensees over their plans to take legal action against the Government’s new taxes, arguing that Freeport’s ‘tax free’ status needed to be put beyond doubt,

K P Turnquest, the FNM representative for eastern Grand Bahama, told Tribune Business it was “time to set the record straight” on whether Freeport was governed by the Hawksbill Creek Agreement (HCA) or from Nassau.

Pointing out that Freeport was currently subjected to “two sets of taxes and rules”, Mr Turnquest, with one eye to the immediate future, added: “God knows what will happen when VAT comes in.”

A former Grand Bahama Chamber of Commerce president, Mr Turnquest said it was “ironic” that the Christie administration was now increasing the tax burden and cost of living, given that it had campaigned on promises to do the opposite.

Questioning what had happened to the Government’s promises to extend Freeport’s tax concessions to east and west Grand Bahama, Mr Turnquest called on the GBPA to stand up for the Hawksbill Creek Agreement’s “integrity” and rights of its 3,500 licensees.

“It’s obviously a very significant concern,” Mr Turnquest told Tribune Business of the new and increased taxes imposed on Freeport by the 2013-2014 Budget.

“I wholeheartedly agree with the proposed legal action Mr Smith [the Callenders & Co attorney] is preparing to take.”

And the MP added: “It’s time to set the record straight. We are either a free trade area or we aren’t.

“We’re either governed by the Hawksbill Creek Agreement and the provisions therein, or we’re subject to the Government’s taxes. It’s unfair to be subject to two sets of taxes and regulations.”

The taxes that have caused most consternation in Freeport are the new 1 per cent Customs administrative processing fee; the ‘Environmental Levy’, and the host of aviation-related fees.

Mr Turnquest said GBPA licensees were now being required to pay the Government’s ‘Environmental Levy’ even though they already paid Sanitation Services for garbage disposal and collection in Freeport.

Effectively, this means GBPA licensees are now being ‘double taxed’.

The former Chamber president backed assertions by Robert Myers, owner of VTrade Company, that the new taxes would destroy both his business model and hopes of establishing Freeport as an international distribution/logistics hub.

“If you’re importing and exporting, going in and going out, the cost of a full container is going to be up to $1,000 more,” Mr Turnquest said.

“At some point the cost becomes untenable, and you cannot absorb it. We have to decide what business we want to be in, in Grand Bahama, and tailor our fee structure to support it.”

The GBPA has to-date mustered a relatively tepid response to the situation, although in brief media comments it has indicated support for its licensees’ position and the potential legal action.

Mr Smith previously indicated that the GBPA could be named as a defendant in the lawsuit, alongside the Government, if it did not stand up for its licensees.

“I have kind of noticed something in the paper that they’re [the GBPA] talking to the Government with respect to it,” Mr Turnquest told Tribune Business.

“Certainly, they’re obligated to the licensees to protect them, and protect the integrity of the Hawksbill Creek Agreement, of which they are beneficiaries. I hope they will follow through and ensure the rights of licensees are protected.”

As for the overall impact of the Government’s tax increases, Mr Turnquest said: “There has been tremendous concern from the business community with respect to the cost of doing business in Grand Bahama, and ability to provide a competitive product to the local market, as opposed to individuals going on a plane to Florida to shop.”

The MP added that it had all made for “a negative effect on the economy”.

“The Customs processing fees, and aviation landing and departure taxes, they all drive up the cost of service,” Mr Turnquest explained.

“God knows what will happen when they add VAT on top of this. It’s ironic that this is coming from a government that campaigned on the lowering of taxes, and lowering the cost of living for ordinary Bahamians.”

Noting that Bahamian retailers had to spread the new fees across even breadbasket items, Mr Turnquest added: “The cost of supplies has to go up.

“They’re not only attacking the middle class, but also attacking the poor. It’s kind of ironic.”

Pointing to what he deemed as other broken government promises, the FNM MP said: “In respect of eastern Grand Bahama, the Government campaigned that they would extend duty free concessions to these areas.

“With the introduction of these fees, are they still going to do this? No more has been said on it, and I don’t see it. It had been studied before they made their promises, but instead of reducing costs, they’re increasing costs across the board.”

Concerns have also been expressed about the increased 5 per cent tax rate being imposed on profits repatriated overseas to parent companies/owners, a 3.5 percentage point rise from the previous 1.5 per cent.

However, the Government has since clarified that this will only be imposed on companies like the Bahamas Telecommunications Company (BTC) and Commonwealth Brewery, which generate their income in Bahamian dollars, but repatriate profits in foreign currency to overseas shareholders.

Freeport’s industrial economy largely earns its income from overseas exports, or is paid in US dollars or other foreign currencies.

As a result, the Government’s position is that they will not be impacted by the 5 per cent ‘profit tax’, as there is no need for exchange control approval to convert from Bahamian to US dollars.