By NEIL HARTNELL
Tribune Business Editor
Fears of "duty arbitrage" and tax evasion mean that businesses in the proposed Over-the-Hill 'tax free zones' will not receive breaks on the goods they sell, the Government revealed yesterday.
The Minnis administration, unveiling its long-awaited proposals for the Economic Empowerment Zone including Bain Town, Grant's Town and parts of Centreville, said providing Customs duty exemptions on all goods purchased by businesses in those areas raised several concerns.
Apart from the possibility that merchants would be stuck with inventory upon which they had already paid taxes, and were unable to move, the Government said such tax breaks would be extremely difficult to police and prevent abuse.
"It has been historically difficult to devise a mechanism for merchants to transparently back out all duties from existing stock to take advantage of duty exemptions," the 'White Paper' said.
"If implemented, this would have had to have been applied to a broad range of goods and suppliers, and it would be extremely difficult to prevent and detect goods purchased by retailers in the zone from being resold to merchants out of the zone, thereby resulting in duty arbitrage and leading to substantial revenue leakages."
As a result, the Government said it will not include such provisions in its incentive package for the proposed Economic Empowerment Zone, which will initially enjoy such status for a five-year period.
The Prime Minister made the economic and social revival of traditional Over-the-Hill areas an election campaign priority and, almost one year into his tenure, is now seeking to deliver on his promises.
The Government is recommending that the Economic Empowerment Zone's designation be renewed up to three times for a period of five years each, thereby making the maximum period of time such status can last for some 20 years.
The standard real property tax, Customs and Excise Tax, and Stamp Duty exemptions are proposed for property owners wanting to make a capital investment in upgrading their real estate assets, with the Government proposing "an electronic card system" to monitor and regulate all tax breaks.
Companies in the 'Zone' with an annual turnover of $5 million or less will be able to apply for a 'Trade Certificate' exempting them from Business Licence fee payments, although web shops and liquor stores will not be eligible for any tax breaks.
Vehicles for use in a business with a Trade Certificate will also be exempted from import tariffs, although there will be fines and penalties for companies found guilty of fraud and other abuses.
Management of the Economic Empowerment Zone will be linked to the Government's planned introduction of local government to New Providence, with an Economic Development Agency also set to be created to oversee the initiative. Legislation for the Agency's establishment will be circulated for public consultation by 2019.