The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Abaco’s economic output “will come roaring back and blow 2018’s figures out of the water” if the island’s recovery is freed from the Government’s constant rule changes, its Chamber of Commerce president argued yesterday.

Ken Hutton told Tribune Business it was “amazing” that the Dorian-ravaged island’s gross domestic product (GDP) had increased by 55 percent between 2020 and 2021, according to newly-released data from the National Statistical Institute, but asserted that it could “be so much further along” in its recovery if there was certainty regarding the Special Economic Recovery Zone (SERZ) and the tax breaks offered to rebuilding residents and businesses.

The latest confusion, he added, surrounded a “without notice” change that seemingly makes VAT and duty payable by all who lack a stamped SERZ certificate from the Ministry of Finance. Besides the hundreds of applicants still awaiting a response to their certification applications, which were made prior to the March 31 deadline, Mr Hutton said this seems to contradict the actual SERZ relief Order that was signed into law on January 5 this year.

That Order’s section 4 states that the wholesale and retail sale of all building materials, hardware, furniture, fixtures, electrical and plumbing supplies in a SERZ is to be VAT zero-rated until December 1, 2022, “subject to conditions stipulated by the Ministry of Finance.

“Local businesses have not been informed how it affects them,” Mr Hutton said of this change. “Up to now, they’ve been selling materials VAT and duty-free at the point-of-sale. Do we go back to charge VAT and duty at the point-of-sale, and only exempt those customers with a certificate? That is not what Order on January 5 and its section 4 said.

“Is that still the case? I don’t know. If that is not the case, nobody has been notified, and that entails a tremendous amount of work for the retailers and wholesalers here. There has to be a double configuration of their systems: Some people do not get the exemptions and some people do. You have to set your system up like Freeport, bonded and non-bonded. It’s not something you can do overnight.

“It’s just again another unnecessary level of uncertainty that has been thrown at us when what we need is just to give Abaco the tools, the time and opportunity, and it’ll come roaring back and throw the 2018 GDP numbers out of the water in very short order.”

Abaco’s 2021 GDP of $345.7m is almost 42 percent below the $594.3m it achieved in 2018, thanks to the combined devastating blows of Dorian and COVID-19. However, last year’s output came close to matching 2019’s $393.7m, when Abaco enjoyed eight uninterrupted months prior to the Category Five storm.

The Davis administration, though, has been seeking to roll-back and contain Dorian recovery-related tax breaks in the belief that it is giving too much away, especially to wealthy second homeowners (many of them foreign) that it believes can afford to rebuild without taxpayer assistance.

Mr Hutton, though, attacked this as “jealousy and ignorance” in a letter he sent last Thursday, April 7, to Abaco’s two MPs, John Pinder and Kirk Cornish, warning of the concerns developing among the island’s residents and business owners.

He told the two parliamentary secretaries: “We have a major issue regarding a change to the SERZ regulations. I was just informed that the SERZ concessions have been amended, without notice, and VAT and duty are now payable everywhere in Abaco unless one has the stamped SERZ certificate from Ministry of Finance.

“The application deadline passed at the end of March and there are still many applicants who have not received a response. Further, we have been informed no additional applications will be considered even if the applicant was unprepared, unable to or not in a position to complete the application before the deadline.......

“According to what I was told by my Customs broker, the new SERZ regulations will mean all retail and wholesale businesses in Abaco will have to start charging VAT at point-of-sale unless a stamped SERZ application is presented. This unannounced change brings several operational and financial challenges, which entails a significant reprogramming of systems,” he added.

“Under the SERZ Order of January 5, it says that local wholesale and retail of goods within the schedule are to be sold as VAT zero-rated. The changes made, without consultation from Abaco stakeholders, have significant and far-reaching impact. The new PLP government came to office promising to consult with local stakeholders but, instead, we are still being ruled by edict out of the capital by an administration far removed from the people most affected by their policies.”

Turning to the broader picture, Mr Hutton wrote: “ The declared purpose of the SERZ concessions from the beginning was two-fold: To encourage rebuilding and incentivise the local economy back to growth. Abaco was initially told SERZ would be in place for three years, which all agreed would have been sufficient time to get the economy back on its feet and on its way to growth again.

“The arrival of COVID resulted in critical delays to that recovery and threw the process back by at least a year or more. Add to that, Abaco is now being affected by historic inflation and global supply chain issues causing rebuilding to be not only more expensive but also more prolonged. The impression in Nassau that some underserving people are benefiting from SERZ more than others is based on jealousy and ignorance of the facts on the ground.

“We need the concessions to continue unaltered for at least two more years. We are nowhere close to having a robust economy. People are struggling just to get by. Delays, unannounced changes and reductions to SERZ not only add an unnecessary level of uncertainty, but increase an already heightened level of mistrust and resentment of the Government caused by the former administration’s gross mismanagement of the Abaco disaster response.”

Mr Hutton, saying he was disappointed not to have received an acknowledgement of his e-mail from either MP, had concluded his letter by saying: “I don’t think the Abaco community is going to take this lightly.”