The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government has been urged to provide Grand Bahama Port Authority (GBPA) licensees with “certainty”, after it gave them another two-month extension to apply for renewal of key tax breaks AFTER the previous deadline expired.

Carey Leonard, the former GBPA in-house counsel, told Tribune Business that the Government would continue to be met with private sector “suspicion and mistrust” unless it became more transparent over how businesses could qualify for reinstatement of their investment incentives.

He was speaking after the Government, following the close of business on Thursday, May 4 - the date by which the Grand Bahama (Port Area) Investment Incentives Act 2016 required GBPA licensees to apply - extended the deadline to July 4, 2017.

Mick Holding, the Grand Bahama Chamber of Commerce’s president, told Tribune Business that the Government’s extension notice would have been far more useful if issued prior to May 4, given that many businesses had already rushed to apply.

“We received it at the Chamber some time after 6pm last night [Thursday night], after the office had closed,” Mr Holding said, adding that the Chamber only became aware of the extension on Friday, May 5.

“It was a very 11th hour thing,” he confirmed. “To have been effective, it should have been issued a couple of days earlier.

“This is the third extension now. They’ve given no reason for it. Unlike the previous two, this one gives an additional two months, whereas the previous two were for one month.”

Mr Leonard, meanwhile, suggested that the Government had been forced to grant an additional two-month extension because not enough of the GBPA’s 3,500 licensees had applied.

“You’ve got to love it,” he told Tribune Business. “I guess they didn’t have enough people sign up for it, so they decided to leave it open a little longer. I don’t recall anyone who’s actually told me they’ve applied for it.”

The Christie administration introduced the Grand Bahama (Port Area) Investment Incentives Act 2016, which requires GBPA licensees to apply for renewal of their real property tax, capital gains and income tax exemptions, after these rights under the Hawksbill Creek Agreement expired on May 4, 2015.

A series of extensions has now given GBPA licensees until July 4, 2017, to apply, and Mr Leonard said the Government needed to become more transparent and set out the criteria by which firms could qualify for the tax breaks renewal, and for how long.

“I don’t understand the reason, and I have to put it this way, why the Government is so intent on getting everybody to sign up for this thing,” Mr Leonard told Tribune Business.

“It may be so that the Government can come up with a criteria for what you need to get approvals. If they want to know why people are not signing up, it’s uncertainty.

“If they want people to sign up for this stuff, they’ve got to introduce certainty and the criteria for you to get approval,” he added. “Leaving it so open makes people nervous, and wondering why you need so much information on my company.

“Why are you begging me to fill this out? There’s a very high degree of suspicion and mistrust, or should I say, lack of trust. The Government may be doing it with the best of intentions, but until we have certainty, and that means setting out the criteria and everything else, it’s going to have a difficult job selling it.

“One of the reasons the Hawksbill Creek Agreement is so successful is it guaranteed certainty. And the courts have shown that over and over again. You can go to court, have clarity, and business people can have confidence they can do certain things and the court will protect them. That’s the bottom line; lack of certainty.”

Among key GBPA licensee concerns is that the length of time for which the tax breaks will be renewed is uncertain, and appears left entirely to the discretion of the Investments Board and responsible minister.

Then there is the fear that licensees not planning to expand their business are 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 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.

The Act enables 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 demands retroactive or ‘back’ taxes.

Mr Holding, meanwhile, expressed hope that “the intent behind” the two-month extension was to provide more time to resolve the outstanding issues and communicate “effectively” with the GBPA licensees.

He predicted that “the majority” of Freeport-based businesses would not have applied by last Thursday’s deadline, with foreign-owned companies likely predominant among those who did because of their potential real property tax exposure.

Mr Holding said the deadline extension also ensured the issue would not be caught up in Wednesday’s general election, and added: “The election has probably delayed the discussions that were planned between the Chamber, Port Authority and the Government.

“That’s probably the basis of the two-month extension this time; to give time to settle down post-election and have meaningful discussions again.

“We’ll be making approaches, not the next week, but the week after, to whoever’s sitting in the Ministry of Grand Bahama to re-open the discussions.”