The Tribune

• SERZ expiry rationale branded ‘outrageous’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday accused of delivering “a slap in the face” to Abaco and Grand Bahama by confirming that both islands’ present Dorian-related tax breaks expire today as scheduled.

Daphne Degregory-Miaoulis, the Abaco Chamber of Commerce’s president, told Tribune Business that the move will only “stagnate” the island’s efforts to recover from the Category Five storm and further delay “getting back to being the second largest revenue generating island in the country for the Public Treasury.

Branding the decision as “short-sighted”, she argued that the Davis administration was focused solely on the tax revenues foregone by the past three years-plus concessions while ignoring the multiple benefits generated by the Special Economic Recovery Zone (SERZ).

These included incentivising a faster economic rebound than Abaco would otherwise have enjoyed if it did not have the concessions. And Mrs Degregory-Miaoulis also urged the Government to “take the guessing out of this game” by providing clear guidelines and criteria for how Abaco residents and businesses - and their Grand Bahama counterparts - can apply for, access and qualify for Dorian-related tax breaks under the new regime that takes effect today.

The Ministry of Grand Bahama, in a short three-paragraph statement that confirmed the present “blanket” exemption structure ends today, said those still requiring tax relief to aid their post-Dorian recovery can apply either to its offices in Freeport or the Prime Minister’s Office in Abaco.

“The Ministry of Finance will review and, where appropriate, approve applications on a case- by-case basis to ensure that [they are] directly related to loss associated with Hurricane Dorian, and that conditions of the concessions are being honoured,” the Ministry of Grand Bahama added.

Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business earlier this week that the present concession structure “cannot go on indefinitely” and needs to be “rebalanced” given that the Government is foregoing $40m-$50m in annual revenues, and “actually higher”, as a result. He said the Dorian tax breaks were effectively being financed, or “cross-subsidised”, by taxpayers on New Providence and other islands that escaped the Category Five storm.

This drew a rebuke from Carey Leonard, the former Grand Bahama Port Authority (GBPA) in-house counsel, who described the Government’s rationale as “outrageous” and betrayed a lack of understanding of the plight Abaco and Grand Bahama residents still face from having their homes and livelihoods “obliterated”.

Pointing out that Grand Bahama and Abaco had, for many years, both been positive net revenue contributors to the Public Treasury, the now-Callenders & Co attorney argued that both islands had previously subsidised Nassau and the capital’s economy that remains heavily reliant on the Government and public sector.

“I would like to remind Mr Wilson that I had a conversation with a former financial secretary who said the profits from Grand Bahama to the Public Treasury was approximately $60m a year,” Mr Leonard asserted. He quickly acknowledged that this had slipped over the past two decades, and the island is now likely a net drain on taxpayers, but said the surplus delivered by Grand Bahama “went on for decades and was not less than $60m”.

Pointing out that Abaco, too, was a positive net tax earner prior to Dorian, Mr Leonard blasted: “To turn around and say they’ve been subsidised by Nassau for three years is an outrageous comment. In addition, I want to remind him that a former minister of finance said one in five jobs in The Bahamas is attributed to the Government, whether direct public service employees or working for corporations like Bahamas Power & Light (BPL) and Bahamasair.

“Whatever. Let us remember that the majority of civil servants work in Nassau. That probably means one in three jobs in Nassau are related to the Government. That also means for years that the islands of Grand Bahama and Abaco have been propping up the islands of Nassau.”

Asserting that he was “quite frankly offended” by the argument that New Providence has been subsidising Nassau post-Dorian, Mr Leonard agreed that the expiring “blanket” concessions could not continue indefinitely. However, he added it was “clear” that the Government has “little understanding of the difficulties Bahamians are facing when their home or business is obliterated.

“It takes more than three years to recover,” the attorney said. “If they want to limit the items that are coming in VAT and duty-free, that may be something to consider, but they need to be realistic about it. They cannot be Nassau centric. Someone needs to stand up, quite frankly, for the people of Abaco and Grand Bahama.”

Mrs Degregory-Miaoulis, meanwhile, said the Government’s SERZ move was “expected” but still frustrating for residents and businesses on both islands. “I just think it’s going to seriously delay and slow the process of ongoing repairs,” she added. “People still haven’t cleaned up their properties. What’s the Government going to do about that?

“It’s going to slow the process. It’s going to stagnate and slow the potential of Abaco getting back to being the second largest revenue generating island in the country. It’s going to be very difficult for those persons who have not started. I think it’s short-sighted and I think it’s unfair.”

Calling on the Government to provide concrete figures for how much revenue has been given up under the SERZ, and the taxes gained from Abaco and Grand Bahama over the same period, Mrs Degregory-Miaoulis argued: “They’re looking at it from one end - the loss of revenue, but are they taking into consideration what they gained on the other side?”

Pointing out that Abaco’s economy, and taxes generated by tourism and real property levies, may not have rebounded as quickly as they have without the post-Dorian tax breaks, she added: “How many people have been able to rebuild, how many have been employed, how many businesses re-opened and how many vacation homes have been rebuilt?

“You can’t look at it just from a loss standpoint. You have to look at the gains. They’re basically ignoring the upside of the SERZ and just looking at the downside of the SERZ. They’re making no allowance for the year-and-a-half lost to COVID lockdowns. The Abaco Chamber of Commerce is disappointed that they’ve given no consideration to the year-and-a-half lost and revenue generated as a result of the SERZ Order being in place. They can’t look at it from one side.”

Mrs Degregory-Miaoulis also called on the Government to provide far more information on how the new Dorian tax relief regime will work. While it yesterday revealed who applications should be made to, she said much more was needed - especially the nature of the supporting documents that must be provided; the criteria that will be used to judge and vet which applications will be approved; how quickly they will be turned around; and for how long approvals will last.

The Abaco Chamber chief added that clarity was also required over whether approvals could be used to obtain tax relief on purchases from Abaco and Grand Bahama-based businesses, or if they only applied to imports from abroad. “They haven’t come out with clear guidelines on how we apply, what we need to apply and what the criteria is,” she said.

“They need to be very clear on who qualifies, and how. We want to know what the process is.... who, what and how concessions can be obtained, in what timeframe and how long are they going to be honoured for? Do you have to apply within 12 months, and how long will they take them into consideration before they say: ‘No more’. They need to take the guessing out of this game.”