The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Attorney General yesterday confirmed that the 15 percent corporate income tax “will apply” in Freeport amid fears it may conflict with the city’s founding treaty and other laws.

Ryan Pinder KC, in messaged replies to Tribune Business inquiries, confirmed the Domestic Minimum Top-Up Tax Bill 2024 that was laid in the House of Assembly yesterday will be imposed on Grand Bahama Port Authority (GBPA) licensees who are part of corporate groups generating more than 750m euros in annual turnover.

The Bill itself, using language similar to the recently-enacted Electricity Act, specifically states its provisions apply to the Port Area even though the Hawksbill Creek Agreement, Freeport’s founding treaty, exempts GBPA licensees from paying any form of income tax.

James Carey, the Grand Bahama Chamber of Commerce’s president, was among those voicing concern yesterday that the Government’s push to comply with G-20/OECD global 15 percent ‘minimum’ corporate tax drive might be the latest legislative initiative to run afoul of the Hawksbill Creek Agreement’s provisions. However, attorneys spoken to by this newspaper said the issue may not be so simple.

They pointed out that Freeport’s investment incentives, including the income tax exemptions, expired in 2015 and were never renewed by the-then Christie government which instead passed the Grand Bahama (Port Area) Investment Incentives Act 2016.

Under this legislation, which the subsequent Minnis administration never gave effect to, only the GBPA, Hutchison Whampoa and their affiliates such as the Grand Bahama Development Company (DevCO) were given an automatic 20-year renewal of their income and other tax breaks through to 2036.

All other GBPA licensees have to apply to be granted these by the Government, including exemptions from taxation on “the earnings of a licensee in the Port Area and outside The Bahamas”. Amid this general uncertainty now enters the Davis administration’s move to extend the 15 percent corporate income tax to the Port area.

“Clause three of the Bill makes provision for the Bill to apply to the entire Bahamas including the Port Area as defined in the” Hawksbill Creek Agreement and Freeport Bye-Laws Act, the Domestic Minimum Top-Up Tax legislation states. Mr Pinder yesterday said the Bill has nothing to do with the GBPA or Hawksbill Creek Agreement, and is merely intended to give effect to this nation’s compliance with the G-20/OECD initiative.

“The Domestic Minimum Top-Up Tax Bill has nothing to do with the Hawksbill Creek Agreement or the GBPA,” the Attorney General told Tribune Business. “It is the legislation to implement Pillar Two - the OECD global corporate minimum income tax. It will apply to GBPA licensees operating in the Port Area. It applies to the entire country.” But only to entities part of corporate groups with turnover greater than 750m euros.

The Government’s position appears to have advanced since its summer 2023 ‘green paper’ on corporate income tax reform, which failed to give a definitive position on whether such a levy could be imposed on Freeport given its status as a free-trade zone.

“Businesses under the Hawksbill Creek Agreement in Freeport are exempt from paying the Business Licence fee, alongside the elimination of property taxes and import duties,” it s ‘green paper’ said.

“For these free trade zones, appropriate Bahamian legal advice would be required to determine whether the application of corporate income tax would be legally possible, though any application of corporate income tax would likely erode the competitive advantage afforded to this area.”

GBPA licensees will also be unable to benefit from the elimination of Business Licence fees for those who qualify for the corporate income tax as they presently do not pay this. Instead, they pay a fee to the GBPA.

The GB Chamber’s Mr Carey told Tribune Business: “This is, I guess, the Government’s continued erosion of the permanent power of the Hawksbill Creek Agreement. Maybe it will be another opportunity for the Port to figure out and find out what’s going on with the agreement.

“The question is: Can legislation supersede the Hawksbill Creek Agreement without specifically amending it in the manner prescribed, which requires the consensus of licensees and all that good stuff. I’m not an attorney. I will speak to some of my legal friends and see what their thoughts are. The Government did get VAT implemented in Grand Bahama.

“Government is intent, apparently, on eroding the power of the Hawksbill Creek Agreement. The sooner they see the back of it the better for them, no doubt. This determination to undo the Port Authority is very real. and strong, but the Prime Minister stated he doesn’t intend to undo the Hawksbill Creek Agreement. It’s the families that are the target.”

Freeport is home to a number of entities that would likely meet the qualifying threshold to attract the 15 percent corporate income tax, including the likes of the Grand Bahama Shipyard; BORCO (Buckeye Bahamas); Carnival’s Celebration Key; Grand Bahama Power Company (Emera); and Polymers International.

However, it is unclear whether the 20-year ‘blanket’ tax exemption granted to the GBPA, Hutchison Whampoa and their affiliates in the Grand Bahama (Port Area) Investment Incentives Act 2016 will trump the new legislation that the Government is bringing.

Among the entities covered by the 2016 Act are Freeport Harbour Company; Freeport Container Port; Hutchison Freeport Holdings; Hutchison Ports (Bahamas); Hutchison Ports (Bahamas) Holdings and a whole range of other affiliates and subsidiaries.

Michael Pintard, the Opposition’s leader, while emphasising that he was not supporting either the GBPA or Hutchison, yesterday called for “a more robust discussion” around changes that the Government might want to make to the Hawksbill Creek Agreement rather than “coming and stripping away” its terms gradually with individual pieces of legislation.

Backing the Davis administration’s move to implement corporate income taxation, especially given that failure to do so will allow other countries to collect this revenue, Mr Pintard said: “It makes more sense for us to collect this money than for that money to be collected in other jurisdictions.

“The Government is already missing income in that regard because many countries have signed on to the OECD/G-20 initiative since January. At the end of the day, we support collecting the funds in this jurisdiction given the amount of countries, 147, who have signed on to this.”