The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The one-month extension for Freeport businesses to apply for renewal of their expired tax breaks has “taken the heat off”, the Grand Bahama Chamber of Commerce’s president said yesterday, but numerous concerns remain.

Mick Holding told Tribune Business that the extension until April 4 had eliminated the previous “panic” for 3,500 Grand Bahama Port Authority (GBPA) licensees, who had been faced with a two-week deadline to complete applications and provide supporting documents.

He added, though, that he was still trying to arrange another meeting with the Government, given that numerous unanswered questions remained over how Freeport’s new investment incentives regime will operate in practice.

“It’s taken the heat off us and I think it’s helped a bit,” Mr Holding told this newspaper of the deadline extension, “which is why it was so important to allow that.

“However, people are still saying: ‘OK, we don’t have to panic today, but there are still further questions that need answering’.”

Top of the list of concerns/questions is whether GBPA licensees not planning to expand their business are effectively ‘locked in’ to maintaining their existing employment levels for five years in return for the renewal of their real property tax, capital gains and income tax exemptions.

The application form attached to the Grand Bahama (Port Area) Investment Incentives Act 2016’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”.

The latter category appears innocuous, but when the application form is read with the Act, it effectively “locks in” GBPA licensees to maintaining employment levels for a five-year period regardless of whether there are further market or economic downturns outside their control.

Should a licensee be forced to downsize in those five years to survive, the Act’s section six, ‘Failure to fulfil obligations’, would appear to come into play.

This allows the Minister for Investments to strip Freeport businesses, partially or in full, of their tax breaks, and even enables them to demand payment of taxes that should have been paid if no concessions were granted.

The Act enables the Minister to “reduce or revoke in full” the tax breaks granted, and even “demand payment in respect of any money that would have been payable had no concessions under the Act been conferred”. In effect, it demands retroactive or ‘back’ taxes.

Mr Holding yesterday told Tribune Business that this was “the crux of it all” in terms of GBPA licensees’ concerns, together with how long the tax breaks will be granted for - something that appears left entirely to the Investments Board and responsible minister.

“Those our are questions,” he added. “I’ve forwarded my thoughts on these particular issues in writing to the Minister [Dr Michael Darville], but have not had the opportunity to discuss them with him. Let’s hope we manage to get that meeting this week.”

Mr Holding confirmed that he and other Chamber representatives had yet to have a follow-up meeting with the Government to address the remaining concerns related to the Grand Bahama (Port Area) Investment Incentives Act.

“We’re still seeking a meeting with the Government and the Port Authority to get answers to our list of questions,” he told Tribune Business. “I’ve spoken to people in the Ministry asking for a meeting, if possible, this week. This is very important to the business community.”

Tribune Business sources this week suggested that Freeport’s major industrial enterprises, such as Polymers International, BORCO, Pharmachem and the Grand Bahama Shipyard had been placed on an equal footing with the GBPA and Hutchison Whampoa by being granted the same 20-year extension.

This newspaper was unable to confirm this, though, and Mr Holding said he was unaware of any such development.

“Certainly, the larger industrial companies I’ve spoken to still have the same concerns and questions as the smaller businesses do,” he told Tribune Business, “and more so being foreign-owned, as they don’t get the exemption Bahamians do under the real property tax.”

The May 4, 2015, expiration of the real property tax, income and capital gains tax exemptions previously embedded in the Hawksbill Creek Agreement has afforded the Government the opportunity to bring these incentives directly under its control.

It has done this by passing the Grand Bahama (Port Area) Investment Incentives Act 2016 last year, and tabling the accompanying regulations (although not gazzetting them to bring them into legal effect) in the House of Assembly earlier this year.

All Grand Bahama Port Authority (GBPA) licensees now have to apply to the Government for the renewal of those three key tax breaks. This has seemingly introduced extra bureaucracy and costs, and uncertainty over whether licensees will actually receive the incentives.