The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Grand Bahama Port Authority (GBPA) attorney has accused the quasi-governmental authority of leaving its 3,500 licensees “hung out to dry” over Freeport’s new investment incentives regime.

Carey Leonard, once the GBPA’s in-house counsel, questioned why it had “not seen fit to educate” its licensees on the process they must now undergo to obtain renewed real property tax, capital gains and income tax exemptions.

Now an attorney at Callenders & Co, Mr Leonard suggested the GBPA would have had intimate knowledge of the mechanisms unleashed by Grand Bahama (Port Area) Investment Incentives Act 2016, and their implications for its licensees, given that it was last year’s agreement between itself and the Government that unleashed the new law.

Mr Leonard said the GBPA instead appeared to have effectively abandoned its licensees, and “cut them loose”, having obtained what it wanted via the ‘blanket’ 20-year renewal of its own tax breaks via the same Act.

“I’m surprised the Port Authority hasn’t said anything about this,” Mr Leonard told Tribune Business, adding that he had been informed the GBPA knew about the March 6, 2017, application deadline well in advance.

“I’m interested if the March 6 date was in the Memorandum of Understanding (MoU) between the Port Authority and the Government,” Mr Leonard said. “I’m told from a pretty good source that the date was there.

“I’m surprised the Port Authority has not seen fit to educate their licensees on this matter. Perhaps it’s because they’ve cut their own deal, themselves and Hutchison Whampoa. They’ve cut the GBPA licensees loose in many ways.

“I think the reason they have remained silent is they [the GBPA] don’t give a damn. They don’t care. They’ve got no vested interest in it, and have left them [the licensees] hung out to dry.”

The real property tax, capital gains and income tax exemptions once enshrined in the Hawksbill Creek Agreement, Freeport’s founding treaty, expired on August 4, 2015.

They underwent a series of extensions to allow the Government time to seal its MoU with the GBPA in early summer 2016, which introduced far-reaching reforms to Freeport’s governance and investment incentives regimes.

The latter aspect led directly to the Grand Bahama (Port Area) Investment Incentives Act 2016, which now requires all Freeport-area businesses (the GBPA and Hutchison excepted) to now apply to the Government for renewal of these key ‘tax breaks’.

The Christie administration has thus effectively removed them from the Hawksbill Creek Agreement’s embrace, and instead placed them under Nassau’s direct control via legislation.

Mr Leonard told Tribune Business that this change had ‘devalued’ the worth of a GBPA license, given that the ‘tax breaks’ were no longer automatically granted via the Hawksbill Creek Agreement.

Given that licensees will now be paying a fee to the Government for these incentives, he suggested that a percentage should be deduced from the GBPA license fee as “an offset”.

“The GBPA licensees were paying a license fee to the Port Authority for certain exemptions,” Mr Leonard said. “They seem to be exemptions that are no longer extended, and licensees are now going to have to pay a license fee to the Bahamas Government for these same exemptions.

“I feel the licensees should be able to deduct those license fees from their GBPA license fees, as they are no longer getting what they paid for. The Port Authority can no longer provide it to you, and you’re going to have to go somewhere else.”

Despite not having gazzetted the accompanying regulations to give them effect, the Government has already moved to implement its Grand Bahama (Port Area) Investment Incentives Act 2016.

A newspaper advertisement on February 20 called on GBPA licensees to obtain, complete and submit an application form for continuation of the real property tax, income and capital gains tax exemptions that expired on May 4, 2016, last year.

They were given just two weeks until March 6, 2017, to accomplish this, the date having been chosen because it corresponds to the 10-month application deadline set out in the Act.

It is unclear whether the GBPA would have been aware of the March 6, 2017, date when it signed the MoU last summer. The initial deadline was six months from May 4, placing it at November 4, 2016. This, though, was extended for a further four months due to Hurricane Matthew.

Mr Christie, in tabling the regulations and incentive ‘application form’, touted that it would “secure the economic growth of Grand Bahama and the welfare” of its residents.

Mr Leonard, though, noting that the regulations were only tabled in the House of Assembly on February 9, 2017, said the Government had given GBPA licensees an impossibly short time in which to meet its requirements.

“How can you possibly introduce regulations and then, 10 days later, put an advertisement in the paper and say everybody’s got to comply with everything in a further 10 days,” he told Tribune Business.

“How the heck are businesses supposed to be prepared for this? Hopefully, somebody will come to their senses and extend the deadline out; quite frankly, not for a minimum of six months, but a year.”

The application form attached to the Act’s regulations divides GBPA licensees into two categories; those planning a business expansion within the next 12 months, and those who “expect to operate as a going concern and maintain current staffing levels for at least the next five years”.

All businesses, when applying for their real property tax, income and capital gains tax exemptions, have to supply ‘the estimated market value’ of their real estate holdings and number of staff employed.

Those planning expansions in the next 12 months, though, must provide extra details such as the number of jobs created and the timeframe over which this will take place; any land development and associated timelines; the amount of capital to be invested; and the source of financing.

These businesses are then also asked to “provide evidence that the investment is sufficiently financed”, “the manner and period within” which the investment will be made, and its projected impact on the Freeport economy.

Evidence of Value-Added Tax (VAT) compliance, along with site plans, plus economic and environmental impact assessments, are also being demanded by the Government.

Mr Leonard said he and fellow Callenders & Co attorney, Fred Smith QC, were still assessing whether to take legal action over the new ‘tax breaks’ regime on behalf of GBPA licensee clients.