The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Grand Bahama Chamber of Commerce’s president has pledged to pursue the private sector’s demand for answers over Freeport’s new investment regime as a “priority”, even though the deadline for compliance passed yesterday.

Mick Holding told Tribune Business that “just because the deadline” for submitting applications for a renewal of investment incentives has passed does not invalidate the private sector’s continuing concerns.

Freeport-based businesses had until yesterday to apply for renewal of their real property tax, capital gains and income tax exemptions under the Grand Bahama (Port Area) Investment Incentives Act 2016, despite the Government’s failure to clarify key issues.

“I think the questions are still valid, and I would hope that post today’s [yesterday’s] deadline and, realistically, it will be post-election, that we continue our discussions with whichever administration is in place,” Mr Holding told Tribune Business.

“I think we can still make a contribution on behalf of our members in addressing some of the unanswered questions so that we can advise them accordingly.

“The issues haven’t gone away because the deadline has passed. It’s high on our priority list. It’s certainly up there among the top two or three objectives for the very near future.”

Top of the list of unanswered concerns/questions is whether Grand Bahama Port Authority (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.

This, together with how long the tax breaks will be granted for - something that appears left entirely to the Investments Board and responsible minister - remain the crux of the private sector’s concerns.

Mr Holding told Tribune Business that many GBPA licensees had left it until late to apply, in the hope that the Government might grant another extension. However, that ultimately proved wishful thinking.

“Quite a few of our members have phoned me and the general consensus from those who I spoke to is that they were going to file late Wednesday afternoon or Thursday morning, but were holding off to see if there would be a further extension,” he explained.

Mr Holding said he had heard unofficially that more than 200 GBPA licensees had applied by the start of this week, and added that he expected most of the foreign-owned companies to comply by the May 4 deadline.

The Chamber president explained that these businesses were “immediately vulnerable” to the imposition of real property tax, unlike their Bahamian counterparts, which could be made retroactive to last May.

“Hopefully the extensions they are granted will be long enough for them to continue to make their future plans with the certainty that they’ve got time without the burden of real property tax,” Mr Holding said of Freeport’s foreign-owned businesses, which include the major industrial conglomerates.

“If you’ve got an expansion plan that takes two, three, five years from start to finish, you want to be comfortable in the knowledge of where you are with taxes. Being exempted is important, but knowing with certainty is also important to business planning.”

Bahamian-owned real estate outside Nassau is real property tax-free, and Freeport would likely receive the same treatment. As a result, Port area sources have suggested that the most vulnerable companies are foreign-owned entities used as holding vehicles for commercial and residential real estate.

Mr Holding acknowledged that many Bahamian-owned GBPA licensees may take “a wait and see” approach, given that there is little immediate danger of exposure to greater taxation.

K P Turnquest, the FNM’s deputy leader, has also pledged that his party will either repeal or amend the Grand Bahama (Port Area) Investment Incentives Act 2016 if elected, so many businesses may be waiting on the election’s outcome.