The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An outspoken PLP has slammed the “flawed” consultation on Freeport’s future, and warned that his political career would undergo a “pivotal moment” should the Government use it to “rubber stamp” an extension of the city’s expiring tax breaks.

Gregory Moss, the Marco City MP, stopped short of saying he would leave the PLP should the Christie administration use the ongoing consultation process as the basis for a Parliamentary resolution seeking approval to extend the incentives due to sunset on August 4.

But he suggested that such a government move might be “pivotal” for him, when it came to his desire to “reform” the PLP and governance in the Bahamas.

The Marco City MP expressed concern that the Government-appointed committee tasked with leading consultations with Freeport stakeholders was being used to “lend credibility” to a decision already taken - namely to extend the expiring tax breaks until 2054.

Mr Moss, in particular, said it would be “insane” to extend Freeport’s real property tax exemption until the Hawksbill Creek Agreement’s end.

In an e-mail seen by Tribune Business, he suggested that the major beneficiaries of such an extension would be foreign business interests who could most afford to pay - the Grand Bahama Port Authority’s (GBPA) owners, its Hutchison Whampoa business partner and Freeport’s major industrial concerns.

Mr Moss suggested the Government would be relinquishing at least $67 million in annual real property tax revenues should it extend the exemption.

And he told Tribune Business in a subsequent interview that it was “ludicrous” to entertain discussions of such an exemption when the Government had, in Value-Added Tax (VAT), imposed a tax that disproportionately impacted “the most vulnerable” elements in Bahamian society.

The prospect of a rebellion on the already-restive PLP backbenches may give the Government more ‘pause for thought’ over the Freeport consultation process than threats of a Judicial Review challenge.

Mr Moss’s concerns, although different in substance from those voice by fellow attorney Fred Smith QC, add to the growing pressure on the Government-appointed committee and its consultation process.

Mr Smith confirmed to Tribune Business that he is “currently drafting a Judicial Review application to stop further consultation” by the committee until the Government-commissioned report produced by McKinsey & Co is made available to the public.

“There continues to be a disrespect for the licensees of Freeport, four-fifths of whom are required to consent to any proposed amendments to the Hawksbill Creek Agreement,” Mr Smith told Tribune Business.

“We have a fundamental interest, and are entitled to have all available information so we can make an informed contribution.”

The Government-appointed committee is headed by ex-Cabinet minister Dr Marcus Bethel, and also includes the Prime Minister’s senior policy adviser, Sir Baltron Bethel; ex-Central Bank governor, James Smith; Grand Bahama Chamber of Commerce president, Kevin Seymour, and one of his predecessors, Dr Doswell Coakley.

Sources close to the committee, speaking on condition of anonymity, told Tribune Business that the McKinsey report had not been published because it was just a first draft.

They also suggested that its publication would influence the feedback obtained from Freeport stakeholders, and added that the Government did not want to “tip its hand” to the GBPA before negotiations began.

The positions taken by Mr Moss and Mr Smith, though, foreshadow delay to any decision being taken over the expiring investment incentives. This threatens to further exacerbate the uncertainty surrounding Freeport’s investment climate, and deter capital projects by both existing and new investors.

Meanwhile Mr Moss, who has developed something of a ‘maverick’ reputation for speaking his mind and going against his party, also questioned the “preconception” that the Government needed to negotiate the expiring tax breaks with the GBPA.

The MP argued that the 1968 Benguet agreement effectively meant that the GBPA should be taking orders from the Government when it came to Freeport’s administration and development.

He instead called for the GBPA’s powers to be devolved to a municipal government authority, which would take over Freeport’s administration, albeit with the Hawksbill Creek Agreement’s benefits kept intact for the 3,500 licensees.

Outlining his concerns via e-mail, Mr Moss said the Government-appointed committee’s ‘terms of reference’ were to “’agree’ a process for the extension of the tax exemptions”.

This, he suggested, meant that the results of its consultation efforts had already been determined. “Therefore, it is nothing more than a mechanism for rubber stamping that outcome,” the Marco City MP suggested in his e-mail, describing the process as “flawed”.

“They simply mandate that the committee go ahead and find positive ways to concretise the the extension of the exemptions under the Hawksbill Creek Agreement,” Mr Moss told Tribune Business. “It’s not a committee appointed to consider whether we should be extending them.

“The Terms of Reference are predicated on the extension happening. The committee is basically being asked to rubber stamp a decision already made. It’s a process to lend credibility to the Government’s decision to extend the exemptions in the Hawksbill Creek Agreement.”

Outlining his concerns further in his e-mail, Mr Moss wrote: “One would expect that a responsible approach would have been to have an impartial review of the options and, as a prerequisite to that exercise, to have an understanding of the persons who would benefit from the extension of the tax exemption, and a prior assessment of the annual value of the tax exemption that we are being asked to extend.”

Applying this process to the real property tax exemption, the MP said this tax would only be assessed against Freeport-based real estate owned by non-Bahamians should the break not be extended.

He added that Bahamian-owned property was protected by clause 2(27) in the Hawksbill Creek Agreement, which stipulates that no taxes can be levied in the Port area unless they are collected in the rest of the country. And Bahamian-owned real estate in the Family Islands is exempt from real property tax.

“In terms of the value of the exemption that we are being asked to extend, considering only the industrial sector (with an improved value of at least $5 billion) and the 70,000 acre landholding of Devco (valued at approx $1.7 billion), and we are talking about a tax exemption of at least $67 million per annum. Not per the lifetime of the extension, but per annum. We would be insane to grant that kind of extension,” the Marco City MP wrote.

Mr Moss questioned why extending the real property tax exemption was being considered, particularly in the context of VAT’s implementation. Freeport’s largest foreign-owned business interests would benefit from the former action, he implied, at a time when working and middle class Bahamians had been burdened with increased taxation.

“We have just passed a tax increase on the most vulnerable members of the country, the poor, working and middle classes, and are proposing a tax break for non-Bahamians in the Port area,” he told Tribune Business.

“It’s ludicrous to me that we’re even having this discussion. We’re having significant shortfalls in revenue, we’re facing significant growth pressures for the Family Islands to develop on their own. For us to give it away would be a serious indictment on the Government.”

The Government is expected to use Freeport’s expiring tax breaks, which also include Business Licence and other exemptions, to initiate discussions on the city’s longer-term future through to 2054.

That is when the Hawksbill Creek Agreement expires, and many observers believe the Christie administration is likely to use the ‘2015 talks’ as leverage to achieve several objectives.

These include prodding the existing GBPA owners, the Hayward and St George families, to sell; the GBPA to devolve its quasi-governmental powers; and/or force it to live up to its developmental and governance responsibilities.

However, Mr Moss told Tribune Business that extending the real property tax exemption would allow deep-pocketed foreign investors to “continue not having to make a contribution to the public purse”.

And it would allow the Grand Bahama Development Company (Devco) to carry on “business as usual”, where the absence of ‘carrying costs’ would enable it to hold on to its land holdings rather than sell/develop them.

“In a stagnant economy in the city of Freeport, we’ve not seen a reduction in the price of land, which makes absolutely no economic sense,” Mr Moss said.

He added that extending Freeport’s expiring tax breaks would also undermine the notion of passing the city’s governance from the GBPA to a municipal government authority, as the latter would be deprived of essential revenue sources.

“This is one opportunity we have to create a proper municipal government in Freeport, yet this is the sole source of revenue we have and we’re talking about giving it away,” Mr Moss told Tribune Business.

“The challenge is when you look at the amount of tax revenue potentially available to the Government if you allow those tax exemptions to expire.”

He added in his e-mail: “We should instead be talking about restructuring the governance of Freeport without the Port Authority but, nonetheless, while retaining the benefits of the Hawksbill Creek Agreement.

“An essential starting point to that exercise is to recognize that the GBPA has been a proxy of the Government of the Bahamas since the signing of the Benguet Agreement in 1968 and that to this day it merely operates (on a national level) as a functionary of the Government.”

Mr Moss said that agreement saw the GBPA, in return for the Government approving its sale, agree to transfer responsibility for Freeport’s governance and control - including its licensing functions -back to Nassau.

While the Supreme Court found in the Shangrila case that the Benguet agreement had no binding effect, the Marco City MP is disputing this. He argues that the 1968 deal means the GBPA is acting as a trustee for the Government when it comes to Freeport’s administration, and that successive administrations in Nassau have abdicated their responsibilities in this area.

Mr Moss told Tribune Business that his vision for Freeport was “a proper Hong Kong in China”, where the Bahamas “keeps the Hawksbill Creek Agreement but does it in the context of proper representative government”. That means the GBPA will no longer be responsible for the city’s governance.

He warned, though, that the Bahamas was in danger of handing this vision over “on a whim and a fancy” as a result of the Government’s approach. This, the MP suggested, risked leaving Freeport as a colony under the control of an “imperial” entity in the GBPA.

Mr Moss said the issue of extending Freeport’s expiring tax breaks “will have to come” before the House of Assembly.

He added that he was already canvassing church and civic groups, plus his constituents, on the approach he should take if the matter is put to a vote.

“I expect this will be a watershed point for me, I wouldn’t quite say as far as affiliation, but a pivotal moment for me in my continuing hope that we can reform the PLP and bring proper governance to this country,” Mr Moss told Tribune Business.

He confirmed that he would act as MP for Marco City, instead of being bound by the party line, and reaffirmed: “That will be a watershed moment for me. I believe, and fully expect, it will spark a great divide in the way I see politics at the moment.”