The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Deputy Prime Minister has promised to “roll back” the requirement for Freeport businesses to apply for real property tax exemptions and other incentives, describing this as “a job killer”.

K P Turnquest, also newly sworn-in as minister of finance, told Tribune Business that the Dr Hubert Minnis-led administration would examine the Grand Bahama (Port Area) Investment Incentives Act 2016 in its entirety.

However, he reaffirmed previous pledges that an FNM government would repeal or remove the requirement for the Grand Bahama Port Authority’s (GBPA) 3,500 licensees to apply to Nassau for tax breaks they previously enjoyed by right under the Hawksbill Creek Agreement (HCA).

Asked by Tribune Business whether the new government would hold true to its promises, Mr Turnquest replied: “Absolutely.”

He added: “We know that the whole approval process is not viable and not conducive to a stable investment environment, so that particular clause will be rolled back.

“That’s the one that requires you to apply for property tax exemptions. We want to make doing business as easy as possible, as free from subjective decision-making as possible, and to make the whole process of getting into business and doing business easy and transparent.”

On reflection, Mr Turnquest added: “Perhaps I shouldn’t be so definitive, but as I sit here today, and having had discussions with businesspeople in Grand Bahama, that is the general thought.

“That clause, in particular, is a job killer and no incentive at all.”

Mr Turnquest’s comments are likely to be well-received by the majority of GBPA licensees, given the pervasive uncertainty surrounding the former Christie administration’s demands and legislative impositions.

The major concerns with the new Act and associated application process involve uncertainty over the length of time for which the tax breaks will be renewed, and the fact this appears left entirely to the discretion of the Investments Board and responsible minister.

There is also the fear that 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 responsible 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 Turnquest’s statements to Tribune Business touch on a number of these concerns, and he promised that the entire Grand Bahama (Port Area) Investment Incentives Act 2016 would be reassessed as the new administration determined how best to reignite economic growth in Freeport and Grand Bahama.

“As we move forward and take another look at the objectives of the Act, we will determine how we further positively develop the economy of that island,” the Deputy Prime Minister added.

Mr Turnquest, a former Grand Bahama Chamber of Commerce president with business interests in Freeport prior to entering politics, said the new government was focused on enabling Bahamians, and especially Grand Bahama residents, to “create jobs which are required to build communities”.

The former government recently gave GBPA licensees another two-month extension to apply for renewal of their tax breaks, but only AFTER the previous deadline expired.

Numerous companies, especially foreign-owned entities such as Freeport’s major industrial conglomerates, will all have likely applied by the previous May 4 deadline given that they were the ones potentially exposed to real property tax’s imposition. Given that Bahamian-owned real estate in the Family Islands is exempt from real property tax, the same treatment would likely apply to Freeport.

The Christie administration introduced the Grand Bahama (Port Area) Investment Incentives Act 2016 as a way to bring Freeport’s real property tax, capital gains and income tax exemptions under its control via legislation, after these rights -previously vested in the Hawksbill Creek Agreement - expired on May 4, 2015.

The former government felt that the ‘blanket’ availability of such tax breaks had failed to stimulate economic development in Freeport, with foreign real estate owners, in particular, viewed as ‘buying and holding’ due to the absence of any carrying costs via real property tax.

It appears to have viewed the 2016 Act, and associated application process, as a mechanism through which it could ensure the Bahamas received ‘development in return for tax breaks’.

However, the Christie administration granted Hutchison Whampoa and its Grand Bahama Development Company (DevCo) affiliate, Freeport’s largest landholder, together with the GBPA and its affiliates, a ‘blanket’ 20-year renewal of all their tax breaks.