The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known QC yesterday accused the Government of attempting to undermine the Hawksbill Creek Agreement by offering Freeport’s major industrial companies Industries Encouragement Act incentives.

Branding this “a divide and conquer” tactic by the Christie administration with Freeport businesses poised to launch a Judicial Review legal challenge to the Budget’s new and increased taxes, Fred Smith also warned the Grand Bahama Port Authority (GBPA) it was “being blind” to the implications.

“What the Government is doing is saying: ‘We don’t care about the Hawksbill Creek Agreement,” the Callenders & Co attorney and partner told Tribune Business.

“They’re saying: ‘We don’t want the Port Authority to decide what you pay taxes on. We want you to come to central government, and not the Port Authority’.”

And he added: “The Port Authority is also being blind in not appreciating the Government is not only targeting licensees, but is also trying to kill the Port Authority as a one-stop shop for licensing in Freeport.”

Tribune Business was told by sources familiar with the matter that the Government first started dangling the possibility of offering major Freeport-based manufacturers Industries Encouragement Act incentives when Michael Halkitis, minister of state for finance, and a team from the Ministry of Finance visited Freeport two weeks ago.

The meetings are understood to have included sit downs with the Port Authority, Grand Bahama Chamber of Commerce, Pharmachem, the Grand Bahama Shipyard and others.

However, in an e-mailed response to Tribune Business’s inquiries, Mr Halkitis denied that the Industries Encouragement Act and its incentives were ever raised in the meetings by either side.

“I was in Freeport and met with the GBPA, GB Chamber executives and three major companies operating in Freeport,” the Minister confirmed.

“The objective was to hear their concerns, which were mainly over the Customs processing fee that was introduced this year. We think that there was a constructive dialogue, and we agreed to keep lines of communication open. We believe that we were able to allay some concerns and bring clarity to the application and potential impact of the processing fee.”

Yet he added: “I want to make clear, though, that there was no discussion of the Industries Encouragement Act at all in any of the meetings in which I was involved. The subject never came up.”

However, a source who was present at one of the meetings confirmed to Tribune Business that the Act - and the possibility of extending its benefits to Freeport businesses - did indeed come up.

The source described this as “insidious”, and described it as an attempt to “totally undermine the Hawksbill Creek Agreement”.

They added that it also seemed to be an attempt to split the GBPA licensee basis, and ward of the potential of Supreme Court Judicial Review.

While Industries Encouragement Act incentives could be accessed by the larger Freeport-based manufacturers, the source said smaller GBPA licensees would not be eligible.

Echoing the same theme, Mr Smith told Tribune Business: “This whole end run by the Government in offering to give people benefits under the Industries Encouragement Act is a divide and conquer approach, and what it is saying is the Hawksbill Creek Agreement doesn’t matter.”

Another Freeport-based source, speaking on condition of anonymity, said the Industries Encouragement Act could not compare to the Hawksbill Creek Agreement, which offered GBPA licensees much more.

And Robert Myers, principal of VTRade Company, said: “For the life of me I don’t understand what the Industries Encouragement Act is going to do. We’ve already got duty-free under the Hawksbill Creek Agreement.”

However, Tribune Business was told that one major industrial player was indeed considering the Industries Encouragement Act offer, due to the uncertainty over whether Freeport’s expiring Business Licence and real property tax breaks would be extended beyond 2015.

This newspaper understands that discussions between the Government and major Freeport-based businesses over the Budget’s new and increased taxes continued last week, with at least 12 summoned to Nassau by the Ministry of Finance for further talks.

Meanwhile, a press statement issued on Wednesday suggested that the Freeport Container Port’s staffing levels, and potential $250 million expansion, would be impacted by the new taxes.

The release, said to be issued on behalf of GBPA licensees who did not want their names revealed for fear of government reprisals, said Mediterranean Shipping Company (MSC) - the container port’s principal customer and 48 per cent shareholder - had begun to divert ships to other Caribbean ports because of the new 1 per cent Customs administrative processing fee and attendance fees.

These, the release said, were set to cost MSC an extra $1.5 million per year, and the company’s ship diversions had already resulted in reduced hours at the Freeport Container Port.