By NEIL HARTNELL
Tribune Business Editor
and YOURI KEMP
The prime minister's designation of east Grand Bahama and Abaco as "Economic Recovery Zones" for three years was yesterday hailed by the private sector as "absolutely fantastic".
Ken Hutton, the Abaco Chamber of Commerce's president, told Tribune Business that the three-year term appeared "reasonable" given the extent of the required restoration effort and voiced optimism that the government would be open to extending it if required.
"It's an absolutely fantastic idea and I'm very much in favour of it," he said in reaction to the prime minister's afternoon address. "I think it's great, and is exactly what is needed."
Asked whether the three-year duration was sufficient, Mr Hutton replied: "I think it might be. I think it's too early to tell, and if it needs to be extended longer then hopefully that's an option they do have. Initially I think three years is reasonable."
Dr Hubert Minnis's announcement also addressed any confusion and uncertainty arising from the fact that the initial post-Hurricane Dorian exigency Order, granting import tariff and 'border' VAT exemptions, only lasts until early October.
"They put it in place before anyone realised the extent of what was going to be needed," Mr Hutton added, revealing that the Prime Minister had indicated he was "definitely open to reviewing" the original exigency Order when he met with the Bahamian private sector last Thursday.
"As of right now, if you wanted to bring in stuff for construction, there are no ships coming in from the US as the port is still closed. Every day is ticking by, and you can't stuff here to get the exemptions. The Government has recognised that, and I think there's a desire to be flexible as events unfold."
The Prime Minister yesterday said the combined tax breaks and incentives package to stimulate recovery in the areas hardest hit by Dorian largely mirrors that employed for his Over-the-Hill revival initiative, although it goes beyond that in a bid to revive the real estate market so vital to Abaco's economy.
A VAT credit of up to 50 percent upon the sale of all property in the Economic Recovery Zones will be permitted - a benefit that could be worth several million dollars to buyers and sellers of high-end property in Abaco and its cays.
To qualify for this credit, the sale must immediately be followed by substantial construction or enhancement to the property, or its use for significant commercial activity. The qualifying activity must begin within 75 days of the sale closing, be followed through the scheduled completion otherwise the full VAT sum becomes payable.
Elsewhere, real property tax will not be payable on all eligible properties that are reconstructed, restored or otherwise inhabitable by October 2020.
The Government, however, recognised that any real property tax breaks would solely apply to foreign real estate owners, as Bahamian-owned property in the Family Islands is not subject to this tax.
Rather than a blanket exemption, the Prime Minister announced in foreign land holders in Abaco, the Abaco cays and east Grand Bahama "may" be able to benefit from real property tax breaks only if their developed properties are up to standard or they are taking steps to getting them back up to standard.
While this is designed to aid the second home and vacation rental market, undeveloped properties owned by foreigners in the Economic Recovery Zones will not benefit from the real property tax exemption.
Elsewhere, the Government is establishing a $10m loan guarantee and equity financing facility that is targeted at micro, small and medium-sized (MSME) enterprises to either help them re-open or create new businesses. An applicant will be able to secure a maximum of $500,000.
Dr Minnis also foreshadowed the creation of a "one stop shop" for business assistance for Abaco and Grand Bahama, which will be charged with ending the bureaucracy and red tape facing businesses. It will be staffed by personnel from the Small Business Development Centre (SBDC), Bahamas Investment Authority, Ministry of Finance, Department of Inland Revenue, The Department of Environmental Health Services (DEHS) and Building Permits Unit.
Otherwise, the tax break and incentive package was largely predictable. It features duty-free and VAT 'border' free purchasing of all materials, fixtures and furniture, plus vehicles and equipment required for all business and residential reconstruction. It also extends to all domestic purchases of qualified items so that Bahamian wholesalers and distributors benefit, too.
Business license fees will be waived within the zones, while the availability of provisional business licences will enable entrepreneurs to start their operations within two business days. Businesses and companies taking advantage of these concessions will have to register with the Government as a means to prevent fraud, tax evasion and other abuses.
Dr Minnis said he is extending Freeport's 'bonded items' facility to east Grand Bahama and the Abacos, in a bid to enable both Dorian victims and Bahamian businesses to benefit from the recovery effort. He pledged a five-day turnaround time for business licence applications.
Jeffrey Beckles, the Bahamas Chamber of Commerce's chief executive, yesterday told Tribune Business that "significant tax breaks" are needed to "get the ball rolling" on post-Dorian recovery.
Disclosing that the private sector had been anticipating the "Economic Recovery Zones" plan following its Thursday meeting with Dr Minnis, Mr Beckles said: "It's the right move in terms of what it's going to take to get these areas back up and running.
"If you take it from the perspective of losing second and third largest contributors to our economy, and the expansive displacement of people, taxpayers if I may put it that way, it's going to take that kind of move to facilitate the recovery for those places and, indeed, The Bahamas in the meantime. We don't have the capacity to replace those lost revenues."
Abaco generates around $120m per year for the Public Treasury, and Grand Bahama another $137m, Dr Minnis said yesterday. Mr Beckles added: "There's no doubt the Government is going to have to chip in some money to help this.
"Part of our meeting on Thursday spoke to the capacity that exists in the private sector. The private sector is going to have to invest in this as a true partner with government, as it's too much heavy lifting to be done alone if you want recovery to happen sooner rather than later..... It opens the door to a more efficient plan, wider engagement and dialogue that this thing needs.
"There has to be significant tax benefits to get the ball rolling, because the Government will collect its money half-way through and on the back end. It's the right thing to do. A lot of people may not be able to afford additional borrowing and loans, so the benefit is going to accrue from tax benefits," Mr Beckles continued.
"We're very ready as the private sector to put our shoulder to the wheel and work with the Government to make this happen."