By NEIL HARTNELL
Tribune Business Editor
Just 10 per cent of Grand Bahama Port Authority (GBPA) licensees applied for renewal of key tax breaks via the Christie administration's Grand Bahama (Port Area) Investment Incentives Act 2016, Tribune Business can reveal.
The relatively low figure of 300 applications was revealed last week at a series of meetings between Freeport's private sector and Kwasi Thompson, minister of state for Grand Bahama in the Prime Minister's Office.
It was disclosed to Tribune Business by contacts present at the meeting, and confirmed by Mick Holding, the Grand Bahama Chamber of Commerce's president.
"That was said," Mr Holding replied, when the 300 figure was put to him by this newspaper. "I think that was the number up to probably the May 4th extension, but certainly the July 4th extension.
"They did say that 300 applications had been received to-date, but I would have guessed that was prior to the July 4 deadline."
Given that the GBPA has around 3,500 licensees, even allowing for the fact that some are inactive or not trading, Mr Holding said the number who had applied to the former administration was "about 10 per cent".
"Probably of the active companies it's about 10 per cent," the GB Chamber chief confirmed. "If may have been different if the PLP got back in and stuck to the July 4 deadline.
"My guess is that people were holding off and waiting to see the results of the election."
A Freeport-based attorney, speaking to Tribune Business on condition of anonymity, expressed surprise on being told by this newspaper that just 300 licensees had applied for renewal of their investment incentives. He said his office had handled at least 80 such applications by itself.
Most of the 300 applications are likely to have been submitted by foreign-owned GBPA licensees, given that they were the ones exposed to the former government's Act.
The tax breaks for which renewal was being sought were Freeport's income, capital gains and real property tax exemptions. However, only the latter tax is currently in effect and, because Bahamian-owned land in the Family Islands does not attract real property tax, the same treatment would likely be extended to locally-owned businesses and real estate in Freeport regardless of whether they applied. Foreign-owned businesses and land enjoy no such protection.
The relatively low number of applications also explains why the former Christie administration extended the deadline several times to, ultimately, July 4 in the hope of obtaining more responses.
The introduction of the Act, which was described as "a job killer" by the Deputy Prime Minister, meant that the GBPA's 3,500 licensees had to apply to Nassau for the renewal of tax breaks they previously enjoyed by right under the Hawksbill Creek Agreement (HCA).
The main concerns with the Act and associated application process involved uncertainty over the length of time for which the tax breaks will be renewed, and the fact this appears left entirely to the discretion of the Investments Board and responsible minister.
There was also the fear that GBPA licensees not planning to expand their business were effectively 'locked in' to maintaining their existing employment levels for five years in return for the renewal of their real property tax, capital gains and income tax exemptions.
The application form attached to the Grand Bahama (Port Area) Investment Incentives Act 2016's regulations divided 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 appeared innocuous, but when the application form was read with the Act, it effectively "locked 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', appeared to come into play.
This allowed the minister responsible for investments to strip Freeport businesses, partially or in full, of their tax breaks, and even enabled them to demand payment of taxes that should have been paid if no concessions were granted.
The Act enabled the Minister to "reduce or revoke in full" the tax breaks granted, and even "demand payment in respect of any money that would have been payable had no concessions under the Act been conferred". In effect, it demanded retroactive or 'back' taxes.
The Minnis administration, though, reiterated its pledge to repeal and replace the Grand Bahama (Port Area) Investment Incentives Act 2016 at last Thursday's meeting between Mr Thompson and the private sector. The existing Act's application deadline has been extended until January 4, 2018, to provide time to do so.
"The main purpose of the meeting was for the Government to get some feedback from the business community on the Investment Incentives Act before they start drafting the new legislation," Mr Holding told Tribune Business.
He added that a further series of meetings between Freeport's private sector and Mr Thompson was planned for August, with the Minister looking to meet smaller, industry specific groups numbering no more than eight to 10 persons for more in-depth discussion.
Mr Holding added that last Thursday's talks had inevitably strayed beyond replacing the Act to "the wider economy" and other issues affecting the business community.