The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A top QC has urged the courts to recognise that the Government has “repeatedly tried to break the Hawksbill Creek Agreement”, after Freeport businesses yesterday confirmed they will pursue a Judicial Review challenge to the 2013-2014 Budget’s new and increased taxes.

Fred Smith QC, the Callenders and Co attorney and partner who will lead the action brought by the Grand Bahama Chamber of Commerce/Grand Bahama Port Authority (GBPA) licensees, told Tribune Business the new taxes were merely the latest move to “destroy” the agreement that founded Freeport.

Tribune Business can confirm that, after months of discussions, the Chamber and GBPA licensees finally decided to pursue the long-awaited Judicial Review action at a Friday meeting, which was attended by Callenders’ legal team.

The Freeport private sector, which consists of 3,500 GBPA licensees, had held back to see if discussions between the Christie administration and GBPA would result in the new Budget taxes - particularly the 1 per cent Customs administrative processing fee - removed from the Bahamas’ second city.

Given that these talks appear not to have produced the desired result, Tribune Business understands that the Chamber/GBPA licensees feel they have little alternative but to push ahead with their Judicial Review action.

Sources familiar with developments told this newspaper there was much discussion at Friday’s meeting about the GBPA, and “their lack of support for their licensees” given the negative impact the new taxes/fees have had on many businesses.

“We figured out we had to get together to fight for ourselves, as it was not going to happen if we didn’t,” one source said.

Tribune Business has previously reported how their imposition caused Polymers International to put expansion plans on hold; forced VTrade to exit the core part of its business model; and has driven Mediterranean Shipping Company (MSC) to move its back office from Freeport.

Tribune Business understands that the GBPA may even be named as a defendant in the Judicial Review action, although Mr Smith declined to comment on that. He did, though, confirm proceedings will be filed with the Supreme Court shortly.

Other issues that delayed the private sector’s decision on whether to move forward with the Judicial Review were the need to decide who will be named as the plaintiffs, and assemble financing to cover legal costs.

Mr Smith, meanwhile, told Tribune Business that the 2013-2014 Budget’s taxes represented a “repeat performance of the annual attacks by both FNM and PLP governments on the Hawksbill Creek Agreement.

“There seems to be a concerted move by the Government to destroy the effects of the Hawksbill Creek Agreement,” he added.

“As a licensee, I still can’t understand why the Government can’t see a partnership with the Port Authority and licensees, in which the Hawksbill Creek Agreement is respected and promoted.

“This will be one of a series of cases on Customs issues to come before the courts, and I urge the courts to recognise these are not single cases, but repetitive cases designed to break the Hawksbill Creek Agreement.”

Mr Smith said the 1 per cent Customs processing fee had been especially destructive for Freeport’s maritime and industrial sectors, and the vision for the city to become a logistics, transhipment and export distribution hub.

Given the daily volume of container imports/exports, Mr Smith said the new fee’s impact had been “exorbitant” for companies in these sectors. He added that it “continues to plague” firms such as Freeport Container Port, Freeport Harbour Company and the Grand Bahama Shipyard.

“Year after year, notwithstanding what Minister Darville and Obie Wilchcombe say, Freeport remains in the doldrums,” Mr Smith told Tribune Business.

“Until there is respect and positive reinforcement of the benefits of the Hawksbill Creek Agreement, Freeport will not prosper.

“Respect for the Hawksbill Creek Agreement is the key to Freeport’s future, and not continued government interference, especially with one fundamental benefit that is to exist until 2054, which is the complete exemption from Customs duties and existing duties,” he added.

“It is disheartening that year after year, with both FNM and PLP, efforts are made to devalue and strip away these tax exemptions, which are supposed to last until 2054.”

Mr Smith said some GBPA licensees had seen their shipments held up because they ad refused to pay the new taxes.

The well-known QC said it was also important for the GBPA licensees to stand their ground, and defend their rights, given the precedent it would set for negotiations over Freeport’s Business Licence and real property tax exemptions, which are due to expire next year.

“If the Government really wanted to promote business in Freeport’s recessionary economy, instead of passing this illegal Customs legislation it should be negotiating dramatic benefits to extend past 2015, such as real property tax, Business Licence and Stamp Duty, and other economic incentives to promote Freeport,” Mr Smith said.

“That is what a pro-business government would do for Freeport, instead of keeping everybody in the dark about what it may or may not do, and in the meantime subject Freeport’s ailing economy to further taxes.”

The Judicial Review will focus on whether the new Budget fees and regulations implemented under the Customs Managements Act, which came into effect July 1, 2103, were lawful under the Hawksbill Creek Agreement.

“We had hoped that initial reports, and based on previous comments by the Prime Minister, that these fees would be reversed, but they have not come to fruition,” said Chamber president, Barry Malcolm.

“We need to defend the constraints of the Hawksbill Creek Agreement that we live under, and our members are demanding action to protect the business model set up in Freeport.”

The 3,500 GBPA licensees are mainly concerned about the 1 per cent Customs administrative processing fee. “It’s not only the industrial companies that are feeling the pinch, it’s the everyday ‘mom and pop’ stores that are struggling to compete and stay open with these extra costs,” Mr Malcolm said.

He added that Freeport was not asking for special treatment, “but there is a structured core under the Hawksbill Creek Agreement (HCA) that lays out how business ought to be treated tax-wise.

“Our members want this addressed, especially as we must then look at the proposed Value Added Tax legislation and how that works under the Hawksbill Creek Agreement, then the 2015 real estate tax review.”

The Grand Bahama Chamber of Commerce’s Board is working to engage the business community in all they are doing, and they will soon release its opinion on the VAT legislation.