The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known QC yesterday accused the Government of “trying to blackmail Freeport into development” by dangling the prospect of a repeal of the controversial 1 per cent Customs processing fee in front of select investors.

Fred Smith, the Callenders & Co attorney and partner, told Tribune Business that a repeal of the 2013-2014 Budget’s new and increased taxes should apply to all Freeport’s 3,500 licensees, not just the Freeport Container Port’s owners as a ‘carrot’ to induce its $250 million expansion.

Likening government policy towards Freeport as being akin to “a beating with a stick”, Mr Smith said Prime Minister Perry Christie and his administration needed to realise they would “catch more with honey” in Freeport.

The QC, who will be leading the Grand Bahama Chamber of Commerce’s legal challenge to the new and increased taxes in Freeport, yesterday pledged the action would be filed with the Supreme Court imminently.

But he revealed to Tribune Business that the Chamber was having major difficulties in getting Freeport businesses to step forward and allow their named to be used as plaintiffs, suggesting many were scared of “political reprisals”.

The Prime Minister last week reiterated previous hints that the Government was prepared to roll back the 2013-2014 Budget tax increases in Freeport to facilitate the Container Port’s expansion.

He referred to a Memorandum of Understanding (MoU) that had been discussed with the Container Port’s majority shareholder and major user, Hutchison Whampoa and Mediterranean Shipping Company (MSC), plus talks with the Grand Bahama Port Authority and Grand Bahama Chamber of Commerce.

Mr Smith, though, voiced suspicions that the MoU might create a ‘divide and conquer’ situation, with the Container Port and major international investors in Freeport’s industrial economy the only ones set to enjoy the tax ‘roll back’ benefits.

“As a licensee of Freeport, I am shocked that the Prime Minister has the audacity to try and blackmail Freeport into development by dangling the prize of repealing the new, illegal taxes in consideration of what Freeport will do for him,” Mr Smith told Tribune Business.

“The question is not what Freeport will do for the Government, but what the Government can do for Freeport, as they promised before the election.”

He added: “The Prime Minister has demonstrated a fundamental failure to appreciate the dynamics of the Freeport economy.

“Rather than beat us with a stick, and promise to stop beating if we do something for them, the Government needs to appreciate that Freeport contributes hundreds of millions to the Treasury in return for very little government spending in Freeport.”

Arguing that the benefits from a tax ‘roll back’ should be non-discriminatory and applicable to all businesses, Mr Smith said: “It is shocking to me as a licensee that they would seek to blackmail the industrial developers into some form of MoU.

“These negotiations that have been undertaken by the Port Authority and industrials is nothing more than a tactic to divide and intimidate the smaller licensees.

“If some agreement is being negotiated to roll back taxes for some licensees, the roll back must be for all licensees. Cherry picking between the Government and Port Authority with respect to specific licensees is unacceptable. That’s not the way to do it.”

Reiterating that many of the new and increased taxes were illegal in Freeport because they breached the Hawksbill Creek Agreement, Mr Smith said the Chamber of Commerce’s legal challenge - now understood to be in the form of a constitutional motion than a Judicial Review - will be launched shortly.

But he warned: “The first challenge the Chamber is facing is scare tactics on the part of the Government, which are preventing licensees putting their name in as plaintiffs.

“Although many licensees are supporting the action, few are prepared to be named because they are, quite frankly, living in terror of the political consequences.”

Again urging the Government to work in partnership with the Port Authority and licensees to further Freeport’s development, Mr Smith added: “Instead of beating us with a stick, the Prime Minister should understand you catch more with honey in Freeport.

“They are strangling it every year with new, illegal taxes, administrative restraints, bureaucratic bungling and delays in considering applications, which continues to keep Freeport at the doorstep of economic death.”

Mr Smith again urged the Prime Minister, if the Government was “committed to Freeport’s economic growth, to begin negotiations with the Port Authority and licensees on extending the tax incentives set to expire next year.

This, he argued, would cause investment to “flow into the Bahamas”, with businesses coming into Freeport.

“As it is, we are in a state of limbo, and that is simply bad for business,” Mr Smith added.