The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition parties have “demeaned their credibility” by suggesting the Government has traded tax breaks for just “a couple of jobs” at Baha Mar, a well-known businessman saying: “We’ve seen this movie before.”

Sir Franklyn Wilson, speaking after Tribune Business last week revealed that Baha Mar’s construction completion was ‘VAT free’, acknowledged that investment incentives increased in line with how “desperate” governments were to create jobs.

The Sunshine Holdings chairman, though, described the reaction of Opposition political parties to the ‘VAT exemption’ as “so sad and predictable”, and “almost shameful”.

He suggested that Bahamian politics had deteriorated to the point where the Opposition automatically opposed anything the Government of the day did, and compared the Baha Mar ‘VAT’ controversy to the 1990s dispute that arose over incentives granted to Kerzner International for the Atlantis expansion.

Pointing out that the FNM was then in office, Sir Franklyn argued that investment incentives for major developers were acceptable so long as they did not amount to “more than 20 per cent of the marginal increase in GDP”.

He added that the Christie administration, in the case of Baha Mar, was acting no differently from US president-elect, Donald Trump, when it came to preserving and creating jobs for its citizens.

“When a country, even a country as large as the US, seeks to create jobs, they provide incentives. That’s what they do; that’s what happens,” Sir Franklyn said.

He added that the type and amount of incentives and tax breaks granted depended on both the skill of each side’s negotiators, and the “specific circumstances” surrounding the potential investment to be made.

“What’s the controversy?” the Sunshine Holdings chairman asked. “If you want jobs, that’s what you do. All governments do that.

“Specific negotiations depend on local circumstances and where you are. If you’re more desperate for the jobs, you give more. They are rewards to encourage economic growth.”

The Christie administration is certainly desperate for the initial 1,500 jobs promised with Baha Mar’s first phase opening on April 21, given that the next general election will likely be called within two-three weeks of that date.

The need to incentivise the China Export-Import Bank to both finance Baha Mar’s $600-$700 million construction completion, and make available $100 million to compensate the project’s Bahamian creditors and former employees, even though these were not its liabilities, is also likely to have influenced the incentives granted by the Government.

However, it will also have been constrained by the ‘Most Favoured Nation’ clause in Atlantis’s Heads of Agreement, which require that the Paradise Island-based resort receive the same incentives as those granted to any other Bahamas-based developer.

The Government, though, will likely be hoping that Bahamians forget about the numerous Baha Mar controversies of the past two years as a result of the employment boost, and many observers are interpreting both the ‘VAT exemption’ and ongoing secrecy surrounding the Government’s agreements with the Chinese as evidence that it has had to concede more incentives than normal.

Sir Franklyn, though, compared Baha Mar’s VAT ‘tax break’ to Mr Trump’s calls for the company, Carrier, to keep jobs in Indiana - a request it ultimately agreed to, aided by tax incentives provided by that US state.

“It’s so predictable that one party in office negotiates this thing,” he added of Baha Mar, “and the Opposition say they’ve given this away for a couple of jobs.

“How can you possibly describe what is happening at Baha Mar as concessions being given for a couple of jobs? It’s not responsible. It’s not credible. To me, it just demeans the politician that says it.

“In Opposition, you can make statements that are stupid and create controversy around it. It makes no sense. It is so predictable, and so almost shameful.”

Sir Franklyn continued: “It is like if the unemployment statistics came out and have come down, you know what people are going to say; you can predict what the Opposition party is going to say. If the numbers go up, you can predict what the Opposition party is going to say.

“All these things are turning the electorate off. It’s like a game. It’s so predictable. It’s so sad.”

Arguing that Bahamians had “seen this movie before”, Sir Franklyn recalled the political controversy over the investment incentives granted to Kerzner International for the two Atlantis expansions in the 1990s.

Pointing out that the roles were reversed, with the FNM in government and PLP in opposition, the late Paul Adderley, the latter’s then-finance spokesman, set out the party’s case.

“At least there was an effort to be intelligent about it,” Sir Franklyn told Tribune Business. “Adderley’s case was not that the concessions should not have been granted.

“His argument was that we shouldn’t be doing business with someone from South Africa when the Gleneagles Accord was against it, and the level of concessions was excessive. I didn’t understand him to be saying that the expansion Kerzner was doing was not material to the economy.”

Sir Franklyn argued that if it had not been VAT, the Government would have agreed to give the Chinese another, different tax break.

“Whatever works for the two parties negotiating, that’s what it takes. If not, they find some other way to give incentive benefits. What works for me as a government and you as a developer, that’s fine,” he added, explaining his benchmark for determining whether incentives were justified.

“Every time there’s growth in the economy, approximately 20 cents of every extra $1 generated ends up in the Treasury as tax,” Sir Franklyn explained.

“Once the Government is not giving away concessions that translate into more than a 20 per cent increase in marginal GDP growth, the country is better off in terms of the maths.”