The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Abaco’s Chamber of Commerce president yesterday urged the Government not to use abuse of Hurricane Dorian-related tax breaks as an excuse to narrow or prematurely end his island’s “special economic zone” status.

Ken Hutton, speaking after Customs officials revealed they have recovered “thousands of dollars” in duties on goods initially imported into Abaco and Grand Bahama under the Special Economic Recovery Zone (SERZ) tax concessions, only to then be shipped on to Nassau and other islands, said the private sector backed any smuggling crackdown that the authorities undertake.

Suggesting that the culprits were more likely to be individuals rather than businesses, he added that “greater enforcement” at Abaco and Grand Bahama shipping ports would likely halt such tax dodging schemes which he said were likely to be “a problem but not a massive problem” - especially when compared to the $3.4bn in losses and damages inflicted by Dorian.

“I seriously hope they are not discussing reducing the SERZ because of a few incidents,” Mr Hutton told this newspaper. “I hope that is not even part of the discussion. It is a problem, but I would suggest not a very large problem. All they need to do is step up the enforcement and I think they’ll be fine.

“There is probably more being smuggled into the country via the airports on a daily basis than what is happening in the SERZ zones. There has to be ways of increasing enforcement of it. I’d be very, very surprised if any business was involved in doing it. It’s an individual thing, I suspect.”

Suggesting that a stronger police and Customs presence at Abaco’s docks and shipping ports was required, as well as at similar entry points on Grand Bahama, Mr Hutton added: “I don’t doubt that there’s been some incidents of that. It’s important to police the entire thing. The business community are absolutely supportive of any enforcement initiatives they have to do.

“If they are catching this thing at Potter’s Cay in Nassau, then they got on to the boat here in Abaco where there is no official presence. Maybe that’s something they can look at, which leads me to ask how do they know these goods are being imported into the SERZ zone, cleared into the SERZ zone and then transported?

“If they know that, it will be very easy to stop it right at the docks. I’m sure it’s happening, but the fact they’re collecting thousands of dollars probably means it’s a problem but not a massive problem.” Cloretta Gomez, assistant Customs comptroller, said the agency’s investigations had revealed that goods imported duty and VAT-exempt into the two Dorian-hit areas were subsequently being shipped to other islands that do not enjoy the concessions.

Persons were thus exploiting and abusing the SERZ concessions as a means to evade due taxes, she added, although no figures were provided on how much had been collected, the goods involved or the number of incidents that have occurred. Potter’s Cay, though, has frequently been cited as a major source of revenue leakage and a gateway through which significant smuggling into New Providence and tax evasion occurs.

The Davis administration, since coming to office, 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.

It reinstated VAT on construction services from New Year’s Day and, while extending the tax incentives until December 2022, also required those wanting to access them to apply for permission by end-March 2022. “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 (April 5), 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.

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.

The Ministry of Finance, in its response, said: “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.

“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.”