The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday slammed as “absolutely heartless and cruel” for giving Freeport businesses just two weeks to seek the renewal of key tax breaks in an economy that is “on its belly”.

K P Turnquest, the FNM’s deputy leader, told Tribune Business that the Grand Bahama (Port Area) Investment Incentives Act 2016 and accompanying regulations were “the most ridiculous piece of legislation that has hit Grand Bahama in decades”.

Mr Turnquest, himself a Freeport business owner, said the “tax and bureaucratic burden” facing the Grand Bahama Port Authority’s (GBPA) 3,500 licensees would only increase as a result of having to apply to the Government for the grant of key investment incentives.

Many observers believe tax breaks, such as the real property tax, income and capital gains tax exemptions that now have to be approved by Nassau, already belonged to the GBPA’s licensees by right through the Hawksbill Creek Agreement, Freeport’s founding treaty.

Now, with the city’s business community having to apply to the Government for their tax break ‘rights’, Mr Turnquest said it was “not going to inspire” Bahamian and foreign investors to undertake job-creating capital expansion.

Describing the process initiated by the Act as “a job killer”, the FNM deputy leader argued that the GBPA and Hutchison Whampoa - Freeport’s two largest investors - were, in contrast to the former’s licensees, “being allowed to go scott free” via the automatic 20-year renewal of their tax breaks.

Mr Turnquest was speaking as discontent in Freeport’s private sector continues to build, following Monday’s publication of an advertisement requiring all GBPA licensees to apply for the renewal of their investment incentives by March 6.

This gives them just two weeks to submit their application, and details of any investment/expansion projects they plan to undertake within the next 12 months, to the Government’s Investments Board.

One Freeport-based attorney, speaking on condition of anonymity, said of the March 6 deadline: “You’re running a business, and are supposed to drop everything for this.

“It’s the last minute. They’ve put such a ridiculous timeframe on it. It’s so amateurish. Why not do as they did with VAT and FATCA, and give a proper lead time for the business community?”

The Government, for its part, is likely to argue that GBPA licensees had ample warning of what was coming, given that the original Grand Bahama (Port Area) Investment Incentives Act took effect on August 26, 2016.

The Act was later amended to give GBPA licensees more time to apply for the renewal of their tax breaks as a result of Hurricane Matthew, extending the period from six to ten months after their prior May 4, 2016, expiry.

The amended Act was gazzetted (took effect) on December 22 last year, with March 6 marking the 10-month application it stipulated.

Prime Minister Perry Christie then tabled the Act’s accompanying regulations, the Grand Bahama (Port Area) Investment Incentives Regulations 2017, earlier this month. However, these have yet to be gazzetted, meaning the regulations have not yet officially taken effect.

Regardless, the Government has pressed on with implementing the regulations as evidenced by Monday’s advertisement, with GBPA licensees told to either download the application forms from its website, or collect them from the Ministry of Grand Bahama, Port Authority or local government.

The applications forms, though, have yet to be made available online as promised. Tribune Business sources said businesses that had visited the Ministry of Grand Bahama to collect them had been informed by officials that the March 6, 2017, deadline was likely to be pushed back.

Mr Turnquest, meanwhile, described the two-week deadline as “a bit drastic”, and warned that implementing Freeport’s revised investment regime now would only be a further setback to an economy already treading water.

“To be quite frank, for an economy that is literally on its belly, not on its knees but on its belly, for the Government to be making such a demand now is absolutely ridiculous, heartless and cruel, and it’s obvious they have no interest in trying to rehabilitate the Grand Bahama economy,” Mr Turnquest told Tribune Business.

“These punitive measures and approval process are not going to inspire investment, they’re not going to inspire job creation, they’re not going to inspire Bahamians to reinvest in their businesses, and they’re not going to inspire developers to purchase tracts of land for development.

“I think the whole process and administrative issues are unreasonable at this time for an economy on its belly.”

The FNM’s deputy leader continued: “This is nothing more than an added bureaucratic burden for Bahamians, in particular, and is a disincentive for Bahamians to invest in Grand Bahama.

“It’s the most ridiculous piece of legislation and regulation that has hit Grand Bahama in decades. It’s incredibly regressive. I, like most Grand Bahama businessmen, am absolutely outraged by the stupidity of these provisions.”

Mr Turnquest argued that the Act and its regulations would, in effect, place “an unfair burden” on Bahamian-owned licensees, especially small and medium-sized enterprises, “as opposed to the GBPA and Hutchison Whampoa”.

He added that Grand Bahama’s two largest investors were “being allowed to go scott free from any taxes or any kind of development mandate; the supposed rationale for the rating in the first place”.

The application form attached to the Act’s regulations divides GBPA licensees into two categories; those planning a business expansion within the next 12 months, and those who “expect to operate as a going concern and maintain current staffing levels for at least the next five years”.

The latter category appears innocuous, but when the application form is read with the Act, it effectively “locks in” GBPA licensees to maintaining employment levels for a five-year period regardless of whether there are further market or economic downturns outside their control.

Should a licensee be forced to downsize in those five years to survive, the Act’s section six, ‘Failure to fulfil obligations’, would appear to come into play.

This allows the Minister for Investments to strip Freeport businesses, partially or in full, of their tax breaks, and even enables them to demand payment of taxes that should have been paid if no concessions were granted. In effect, it demands retroactive or ‘back’ taxes (see other article on Page 1B).

“No one can predict what’s going to happen in the next year or six months,” Mr Turnquest said.

“It’s unreasonable to try to lock people into a commitment at this stage. We’re Bahamians. We’re free to invest or not invest. We ought not to be pressured, because the environment is not conducive, to retain the employees we have or expand.”

The FNM deputy leader added that “rather than kill off Bahamian businesses and drive away foreign investors”, the Government needed to instead focus on re-opening the Grand Lucayan and former Memories properties and get hundreds of Bahamians back to work.