The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister last night asserted that the Doctors Hospital and Grand Bahama Shipyard projects proved investors have not been deterred by any uncertainty over Freeport’s investment regime.

Kwasi Thompson, minister of state for finance, told Tribune Business in an e-mailed reply to this newspaper’s questions that the Minnis administration had been “consistent” in ensuring that key tax breaks had remained in-force throughout its four year-plus term to be enjoyed by all Grand Bahama Port Authority (GBPA) licensees.

While slamming the former Christie administration’s efforts to deal with the issue as “a disaster”, Mr Thompson made no mention of whether a Free National Movement (FNM) government would introduce replacement legislation to give Freeport’s business licence, income, capital gains and real property tax exemptions legal protection if re-elected to office on September 16.

This was the key challenge thrown down by former Grand Bahama Chamber of Commerce president, Kevin Seymour, who branded as “striking” the failure of both FNM and Progressive Liberal Party (PLP) manifestos to address how they would ensure the continued security of tax breaks that have been allowed to continue despite the absence of supporting legislation.

Mr Thompson, though, hit back by saying: “The Free National Movement has a comprehensive plan for Grand Bahama. The PLP’s Grand Bahama (Port Area) Investment Incentives Act 2016 was a disaster for Freeport, and thus was never fully implemented even by the PLP. If it was fully implemented, it would have created even more bureaucracy for Grand Bahamians.

“This government has been clear on continuing the concessions for all licensees of the Port Authority. We have been consistent with this for our entire term in office. Investors have also not been deterred from moving forward with their investments in Grand Bahama. In fact, we have seen a significant increase in proposed investments.

“Under the FNM administration we have seen proposed the largest investment in the Grand Bahama Shipyard; the Royal Caribbean/ITM proposed Grand Lucayan and cruise port deal; the signing of the Carnival cruise port; the announced Doctor’s Hospital new hospital; the Pharmachem expansion,” the senator added.

“There is high interest in the Ginn project in West End; the Discovery Bay project with the Weller Group; the Clean Marine Group’s port reception facility; and the West Atlantic Medical School has commenced construction. There is also high interest in the PPP project for the Grand Bahama International Airport.”

As a GBPA subsidiary, the Grand Bahama Shipyard would automatically be entitled to the continuation of its tax breaks, while the former Ginn project lies outside the Port area in West End. Several of the other investments have yet to start physical construction, but Mr Thompson is correct that private sector activity in Freeport has been more than zero.

“This government has also provided some of the most significant concessions for Grand Bahama under the Special Economic Recovery Zone concessions, unprecedented funding for small businesses and now property transactions under $250,000 have no stamp tax or VAT,” Mr Thompson added.

The FNM will continue to move these projects forward which will produce much-needed economic activity and hundreds of jobs. Our manifesto has also articulated our future plans for Grand Bahama. In particular, Invest Bahamas will have an office in Grand Bahama that will specifically be designed to attract and approve investment in Grand Bahama. This will also include significant Investment promotion for Grand Bahama.”

Mr Thompson then went on to list the FNM’s manifesto pledges for Freeport, including more affordable housing and encouraging the GBPA to issue business licences for companies that do not need physical spaces. It will also prod the GBPA to set a flat $100 business licence fee for companies with an annual turnover of less than $100,000.

However, Mr Seymour on Wednesday warned that existing and potential investors, and foreign and Bahamian-owned businesses, are all effectively “in limbo” due to the Government’s failure to enact legislation to replace the Grand Bahama (Port Area) Investment Incentives Act 2016 passed by its Christie administration predecessor.

While that Act was repealed by the Minnis administration in October 2017, shortly after it was elected to office, it has neglected to draft and enact a replacement that would ensure the continuation of key tax breaks for Grand Bahama Port Authority (GBPA) licensees is still protected by law.

These incentives include exemptions from business licence fees, real property tax, income tax and capital gains tax, and they have remained in effect for the last four years - but only because of the Government’s “good graces” or continued willingness to allow this.

Until this is enshrined in statute law, Mr Seymour said Freeport’s business environment will continue to be plagued by uncertainty. And, facing a “bare” Public Treasury, a “capricious administration” voted into office on September 16 has the ability to potentially introduce some or all of these taxes in Freeport given the absence of legal protection.

Should this occur, GBPA licensees will be exposed to double taxation as they would be paying business licence fees to the Government and a separate one to the Port Authority, along with real property tax for Nassau and service charges to Freeport’s quasi-governmental authority.

And the loss of these tax breaks, Mr Seymour said, would undermine Freeport’s status as a free trade zone, with the Hawksbill Creek Agreement still having around 33 years to run.

The repealed Grand Bahama (Port Area) Investment Incentives Act 2016 was met with furious opposition and resistance from many in corporate Freeport when it became law. This was because it would have forced all the GBPA’s 3,500 licensees - bar the Port Authority, its Hutchison Whampoa partner and their business interests - to apply annually to the central government in Nassau for the renewal of key tax breaks.

The former Christie administration sought to tie their grant/renewal to the amount of investment involved and companies avoiding job cuts by maintaining their existing workforces for five years. It also threatened to impose financial penalties on businesses who failed to live up to the promises they made in return for receiving the renewed tax breaks.

The 2016 Act was also seen as an attack on Freeport’s founding treaty, and an attempt to undermine the Hawksbill Creek Agreement, by forcing GBPA licensees to apply to Nassau for benefits and rights this already provided them.

However, Mr Seymour argued that it still preserved the legal basis underpinning the tax breaks’ continued existence, with GBPA licensees able to secure the same 20-year extension as the GBPA and Hutchison Whampoa if they applied and met the then-Christie administration’s qualifying criteria.