The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Freeport businesses yesterday filed their long-awaited legal challenge to the 2013-2014 Budget’s new and increased taxes with the Supreme Court, in a bid to recover all monies paid to the Government over the past 10 months.

Unwilling to accept Prime Minister Perry Christie’s latest assurances that the new taxes will be ‘rolled back’ to facilitate the planned $250 million Freeport Container Port expansion, some 14 Grand Bahama Port Authority (GBPA) licensees have been named as plaintiffs on the summons filed yesterday.

Barry Malcolm, president of the Grand Bahama Chamber of Commerce, which has played a leading role in backing and organising the legal challenge, said the Government had yet to put its tax ‘roll back’ promise to Freeport in writing.

“Despite the recent announcement, the Chamber understands that as of today, nothing has been confirmed in writing to either the Grand Bahama Port Authority or the Grand Bahama Chamber of Commerce on what terms these taxes will be repealed,” Mr Malcolm said.

This, though, conflicted with a well-placed source, who told Tribune Business that the Port Authority had received written confirmation of the tax ‘roll back’, including that it would apply to all 3,500 licensees - not just the large industrial concerns, or firms involved in the Freeport Container Port expansion.

This was confirmed by the Port Authority via an official release last night, which said the Government had taken “a formal decision” on the matter.

Sarah St George, the GBPA’s vice-chairman, said: “In the best spirit of the Hawksbill Creek Agreement, and to promote the economic development of Freeport, we have worked very closely with the Government these last months to achieve a happy and promising blueprint for future capital expansion in Freeport

“We have established an amicable framework for close ongoing interaction between the Government, GBPA and stakeholders in Freeport. Going forward from here, I am confident that all our discussions will be in the same vein, and as productive and definitive as this decision.”

But either way, it appears that the Freeport business community now feels unable to trust the Government’s word, and has no choice but to seek judicial confirmation of its rights under the Hawksbill Creek Agreement.

The summons, a copy of which has been obtained by Tribune Business, show the licensee ‘class action’ is challenging three new taxes: the 1 per cent Customs administrative processing fee up to maximum $500; the Environmental Levy; and the Stamp Duty imposition on dividends, earnings and other financial compensation remitted outside the Port area.

While four of the 14 named plaintiffs are connected to their attorney, Callenders & Co, the remainder include the likes of Kelly’s Freeport; Robert Myers’s VTrade Company; Freeport Gases; Barefoot Marketing; Billie Bowe’s Benchmark Consulting Services; Candid Security; BWA (Freeport; the Flying Fish Restaurant; Guardian Fencing & Shutters; and Keen I Media.

“The primary purpose of these proceedings is to obtain declarations to establish the plaintiffs’ rights under the Hawksbill Creek Agreement,” the summons alleged.

The 14 firms, on behalf of all Port Authority licensees, are also seeking damages “and/or restitution” in the recovery, and repayment, of the monies paid under the three taxes from July 1, 2013, to-date.

The summons seeks a Supreme Court declaration that the 1 per cent Customs processing fee is a tax, and falls within the definition of being a ‘Customs Duty’ under the Hawksbill Creek Agreement.

It also wants the court to rule that this is not payable by Port Authority licensees under the Hawksbill Creek Agreement’s terms, and that its imposition breaches the constitution by “abrogating such licensees’ rights under the Hawksbill Creek Agreement without adequate compensation”.

Similar declarations are sought over the Environmental Levy and Stamp Duty changes, namely that they are not payable under Freeport’s founding agreement, and that enforcing them is a breach of licensee constitutional rights.

Expanding on this theme, the licensees’ summons alleged that by signing the Hawksbill Creek Agreement, the Government pledged “not to impose excise taxes of any kind upon or against any goods articles or things (other than consumable stores) imported into the Port area by the Port Authority or any Port Authority licensee”.

It added that the 1 per cent processing fee met the definition of a tax and ought not to be charged because it was imposed by the state; did not “reflect the value of services” provided by Customs; and specifically related to imported goods.

The same again applied to the Environmental Levy, which the licensees are alleging is not what its name implies, and is not “anything other than an additional Customs Duty”. And there was no suggestion that the funds raised are used to benefit the environment.

As for the Stamp Duty side, the licensee action said the Government also promised under the Hawksbill Creek Agreement not to levy taxes on earnings, dividends and interest payments remitted outside the Port area.

“The imposition of Stamp Duty on the earnings of licensees, on dividends paid by licensees, and on sums transferred by licensees for the purpose of their business, plainly violates the above tax exemptions under the terms of the Hawksbill Creek Agreement,” the licensees are alleging, adding that their “proprietary rights” were being breached.

Mr Malcolm, in a statement, said his members and Port licensees had no choice but to take legal action to protect the viability of their businesses, and their future expansion.

Mr Malcolm added: “Enterprises are now expressing doubt about their future in Freeport because there has been no decision to roll back or discuss with licensees changes to these new taxes.

“We understand the need for tax review, but question whether the changes as they relate to Freeport are consistent with the Hawksbill Creek Agreement .

“Our mandate is to seek clarification through the courts on the viability of the Hawksbill Creek Agreement as the platform for conducting and promoting the business of Freeport, and whether or not the rights of licensees were encroached based on the existing Agreement.”