The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An activist is urging the Government to “not punish thousands of people because of a handful” of tax dodgers who have abused the Hurricane Dorian tax breaks meant to aid Abaco and Grand Bahama’s recovery.

Joseph Darville, the Save the Bays and Waterkeepers Bahamas chief, called on Prime Minister Philip Davis KC and the Government to reconsider their decision not to extend the present Special Economic Recovery Zone (SERZ) Order beyond its December 1 expiration given that it threatens to undermine both islands’ continued recovery from the Category Five storm.

Ministry of Finance officials have previously voiced concern that the SERZ, with its VAT and import duty exemptions on vehicles, building materials, appliances, furniture, fixtures and equipment, was being abused and exploited for tax avoidance and evasion by persons not impacted by Dorian. In doing away with the former “blanket” exemptions structure, they have moved to a “case-by-case” system where the merits of tax break applications will be assessed individually.

Mr Darville, while agreeing that abuse should be investigated, told Tribune Business that the many should not be punished for the sins of a few. “I beg my government to give this serious reconsideration,” he said. “If there has been abuse, investigate the abuse. But don’t punish thousands of people because a handful of people were misusing the concessions.

“It’s really distressing and painful to think about how people in Grand Bahama, especially east Grand Bahama, have been struggling to get back to some semblance of normality. I am appealing to the Prime Minister to reconsider this. If there has been abuse, investigate it, but don’t punish all the people because a handful were misusing the concessions.”

Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business last 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.

Mr Darville, though, blasted that it was “a gross insult to the people of Grand Bahama and Abaco” to suggest that Nassau has been subsidising them and their recovery ever since Dorian. Pointing out that the Government does not incur any infrastructure related costs in Freeport due to the Hawksbill Creek Agreement with the Grand Bahama Port Authority (GBPA), he added: “To even suggest Nassau has been supporting us is totally absurd.

“The fact of the matter is an enormous number of people have been reduced to one meal a day because everything has been destroyed in Freeport and east Grand Bahama. They have no funds to buy the goods they could get duty free at Customs, and how are they supposed to find pennies to buy materials for their homes.

“Even today many of them have not been able to acquire the necessary appliances etc, even beds and mattresses in some cases. It will take at least five years for people in east Grand Bahama, barring further hurricanes, before they come to any normalcy in terms of living conditions in their homes. It’s a total disgrace, and I expect much better from the Prime Minister.”

Michael Halkitis, minister of economic affairs, first signalled the Government’s new direction at the Abaco Business Outlook conference when he asserted that the present wide-ranging concessions regime was “not optimal” and cannot “go on for ever”, hinting it may switch to a framework where tax breaks were granted on a case-by-case application basis.

The Davis administration feels the existing SERZ is giving away too much revenue in tax breaks. It reimposed VAT on construction services earlier this year, with the Ministry of Finance stating at the time that concessions were being granted to wealthy second homeowners who did not need them to rebuild properties that were fully insured to their replacement value. Essentially, the view was such homeowners were getting VAT and duty-relief twice.

Ministry of Finance officials also subsequently said the SERZ and related tax breaks were being abused for tax evasion and other illicit purposes, with vehicles and other expensive items imported using the VAT and duty exemptions turning up at Potter’s Cay in Nassau and other locations outside the Dorian hit areas.

However, Abaco residents and businesses have frequently pleaded with the Government to extend the existing SERZ order beyond tomorrow’s end given that the island’s rebuilding from a storm estimated to have inflicted $3.4bn in total loss and damages will likely take between five to ten years. Now similar sentiments have been voiced by persons in Grand Bahama, especially in the island’s east.

Roscoe Thompson, head of the Marsh Harbour/Spring City Township, last week voiced concerns to Tribune Business that moving to a case-by-case approvals system will expose the process to “political favouritism”. He, in common with other Abaconians, argued that the present tax breaks structure needs to remain beyond December 1 as the island lost a year-and-a-half of reconstruction time to the COVID-19 pandemic.