The Tribune

• Dorian tax break cut-off concern

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Abaco businesses and residents are voicing concerns over the imminent deadline by which they must submit applications for the continuation of Hurricane Dorian-related tax relief.

Ken Hutton, Abaco’s Chamber of Commerce president, told Tribune Business that many had yet to hear from the Ministry of Finance on whether their submissions for ongoing VAT, Excise tax and import duty relief have been approved despite the looming cut-off.

And he disclosed that there were numerous unanswered queries that needed clarifying, such as the fate of businesses and homeowners that presently lack the financing to rebuild but will have the necessary funds in several months’ time. Besides the uncertainty over whether such persons will still receive Dorian reconstruction tax breaks, Mr Hutton said there were also concerns on if approvals will be granted if valid building permits are not yet in hand.

Arguing that Abaco was still fighting to rebuild “with one hand tied behind its back”, the Abaco Chamber chief told this newspaper: “I understand that most of the businesses have put in their application to be covered by the new SERZ (Special Economic Recovery Zone).

“There was a March 31 deadline, but most have not heard back yet because the ministry is overwhelmed with people’s applications.” As a result, some were fretting over whether they will receive tax concessions deemed vital to Abaco’s rebuilding if they do not receive an answer by that deadline.

The Davis administration, in extending the SERZ by a further 11 months to December 1, 2022, included a clause that was little-noticed at the time with most persons just grateful for the extra time. “A person desirous of importing goods into a SERZ.... must make application to the minister of finance to do so within 90 days of the commencement of this Order, and any approval granted shall be valid until December 1, 2022,” the Order said.

The tax breaks/concessions that must be applied for are those that fall under the VAT, Excise, Tariff and Customs Management Act, and cover construction materials, household furniture and appliances, electrical and plumbing supplies. While it would seem that businesses and residents on Abaco and Grand Bahama will still be able to access these incentives after month’s end, even if the approvals come back later, Mr Hutton said other question still linger.

Given that the SERZ Order was signed on January 5, 2022, it appears likely that the deadline will be April 5, 2022, rather than end-March. Still, Mr Hutton added of the cut-off: “The issues we have with that are: Let’s say you aren’t ready, don’t have the money right now, but know that it is coming in a couple of months. You can’t apply now, you can’t apply for March 31, and are past deadline.

“And what happens if the permits are not ready yet? Can you apply and get it? What if you are not living in Abaco presently? Can you apply? The SERZ also expires on December 1, not December 31.” Mr Hutton said applicants have to explain precisely what it is they are constructing, adding that some suspected the March 31 deadline may have been chosen as part of efforts to ensure second homeowners are up-to-date on their real property tax payments.

Simon Wilson, the Ministry of Finance’s financial secretary, could not be reached for comment yesterday. Meanwhile, Mr Hutton argued: “I’m not sure what the reason is to apply for something people already have. I don’t know of anyone who has been rejected yet.

“In the Prime Minister’s own words, up here opening the bridge the other week, he said Abaco has always punched above its weight economically speaking. Right now, it has one hand tied behind its back. If the Government lets us be, and lets us get on with it, Abaco can come back much faster and be in a much stronger position.”

With soaring inflation and construction materials costs, the Dorian-related tax breaks are widely viewed as critical to speeding up and assisting recovery following the devastating Category Five storm. However, the Government’s decision to reinstate the 10 percent levy on construction services in the hurricane-hit areas has already provoked an outcry when it occurred on New Year’s Day.

The Ministry of Finance, in its response, indicated its concern that the Government was giving away too much in tax breaks to wealthy second homeowners who could afford to rebuild without such assistance. “It should be noted that the vast majority of persons in the impacted areas, in repairing their property, will purchase materials and employ labour to effect the repairs,” the Ministry of Finance said.

“With the extension of the SERZ Order, those persons will not be affected because building materials will remain tax free and VAT is not charged on labour in these circumstances. The removal of the zero-rating on construction services is expected to impact a minority of cases, mostly high-end properties.

“The Ministry of Finance will continue to process applications for relief under the SERZ on a case-by-case basis and consider any application for special consideration on its merits.”

Mr Hutton, in response, said: “That’s one way to look at it, but those rich second homeowners look at those properties to bring in tourists and provide jobs. It’s not a one-way street. They are tourist properties that generate revenue for the Treasury. It’s just something else to think about.”