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Extend Tax Breaks Again So Abaco, Gb 'Roar Back'

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Ken Hutton

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Gregory Laroda

* Chamber chiefs plead for second Dorian extension

* Justified as much reconstruction time 'lost' to COVID

* DPM: Government 'cannot carry tax relief for ever'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The further extension of Hurricane Dorian tax breaks is vital to the ability of Abaco and Grand Bahama's economies to "come roaring back", private sector leaders urged yesterday.

Ken Hutton and Gregory LaRoda, Chamber of Commerce presidents for Abaco and Grand Bahama respectively, separately pleaded with the Government to extend both islands' Special Economic Recovery Zone status for a second time given that COVID-19 had blunted their recoveries from the Category Five storm.

Mr Hutton, who said has been in contact with K Peter Turnquest, deputy prime minister and minister of finance, on the issue for some two to three weeks, called for a one-two year extension that targeted VAT and import duty relief specifically at rebuilding and construction-related services.

Pointing out that some seven to eight months have been "lost" to COVID-19, with travel restrictions and other measures limiting the ability of both residents and Abaco second homeowners to return and rebuild their properties, Mr Hutton said extending the menu of tax breaks beyond their 2020 year-end expiry will give "surety and clarity" to the ongoing reconstruction effort.

Asserting that such relief is "not just a freebie", but an incentive to restore Dorian-devastated communities at a more affordable cost, the Abaco Chamber chief argued that the Government will likely "be surprised at how quickly the economy comes roaring back" if it extends the Recovery Zone status.

Failure to do so, he warned, would simply "drag out even longer" Abaco's already-protracted recovery from the Category Five storm's ravages. Mr LaRoda, meanwhile, said that while no formal contact has been made with the Government, a six-month extension of the Special Economic Recovery Zone and all its tax breaks would be welcomed by Grand Bahama businesses.

Noting that many small businesses, in particular, are "still struggling", Mr LaRoda said the need for assistance and a hand-up will continue into the 2021 New Year. And, with tourists unlikely to return in great volume come November 1, he added that the "survival" of many firms hinges on whatever financial relief they can obtain as 2020 draws to a close.

Mr Turnquest, meanwhile, pointed out that the tax exemptions related to building materials do not expire until end-June 2021 to coincide with the close of the fiscal year. He told this newspaper that the "building materials" definition also covered VAT on construction services, meaning that the latter will also be tax free for next year's first half on Grand Bahama and Abaco.

However, while acknowledging that Abaco and Grand Bahama cannot "take off" until homes and businesses are rebuilt, the deputy prime minister warned the Government cannot be expected "to carry these exemptions for ever" given the revenue demands produced by its precarious fiscal position.

And Mr Turnquest said the possible inclusion of home furniture and other homewares among items gaining extended tax relief, as called for by Mr Hutton, required further dialogue between the Government and stakeholders.

Still, confirming that the status of the Special Recovery Zones is on both sides' agendas, Mr Hutton said Mr Turnquest had already been "very responsive" on what he described as a "critical issue".

"You've got to remember we lost seven to eight months due to COVID-19, so a lot of the second homeowners and people who have damaged properties cannot return to repair them," he explained. "There are a lot of residents stuck in Eleuthera, Nassau and Grand Bahama, too.

"They need to be able to have an opportunity to get home and rebuild. It's absolutely critical that we give the people coming back some surety, some clarity that they will be able to do that. We're trying to get people back into their homes."

The Economic Recovery Zones, implemented in late 2019 in Dorian’s aftermath, provide businesses and homeowners in the storm-ravaged areas with a variety of tax breaks and concessions. VAT, import duty and Excise Tax has been eliminated on construction materials and all other physical goods sold and brought into the zones, while discounts have also been provided on real property tax and other real estate-related taxes provided certain conditions are met.

The government also removed VAT from construction services, and has already extended the zones' life once beyond their initial end-June expiry. Mr Turnquest, in presenting the 2021-2022 Budget, said tax relief "on building materials only" would be extended further to June 30, 2021.

Mr Hutton, though, yesterday argued that this definition should be expanded slightly to include furniture, homeware and all materials and appliances employed in fitting out a home. "I think a one or two year extension would be excellent, but it has to be targeted because we understand that government also needs the revenue," he told Tribune Business.

While COVID-19 lockdowns and restrictions have dampened the impact made by these incentives, the Abaco Chamber chief added: "The concessions being given are truly for development, not freebies. The main thing is that we'll be able to get our properties back up and going, not only in terms of being able to live here but generate some revenue for the local economy.

"The biggest thing for the next couple of years is to eliminate VAT on these things. We're not asking for everything to remain duty and VAT-free; just anything related to construction, renovation and rebuilding. I think that if that happens the Government will be surprised by how quickly the economy comes roaring back."

Voicing optimism that the private sector and Ministry of Finance will be able to develop an incentive framework that satisfies the needs of all parties, Mr Hutton said this was critical to preventing Abaco's rebuilding from being "dragged out even longer" notwithstanding The Bahamas' fiscal position. He added that the Government was being asked to trade-off short-term revenues for longer-term gains.

Mr LaRoda said the Grand Bahama Chamber has yet to approach the Ministry of Finance on the issue, but said: "We don't anticipate any long period for the Government to extend it. We will be looking to get an extension to June next year but we haven't approached then Government on it yet

"Lockdowns and restrictions on travel have made it difficult to get things done. To get a business back up and running, some folks have been relying on technicians from offshore to repair equipment. The movement in terms of getting things to the island, some of that has been limited due to the restrictions on travel.

"Just running around the island and talking to some of the small business operators, it's [the extension] something that's really needed to assist the recovery effort. A lot of folks are still struggling. It's not going to be over by December's end. They need to see the benefits of these Special Economic Recovery Zones going into next year. We couldn't get much done in 2020 at all. We look forward to getting the extension."

Mr Turnquest, meanwhile, said he and the Ministry of Finance planned to meet with the Abaco Chamber to "start to understand their concerns". He added the tax relief on building materials, which lasts until mid-2021 while all other exemptions expire, should be "sufficient time for most persons to have started their reconstruction".

"We will evaluate that position, and whether we need to extend it," Mr Turnquest said of the Special Economic Recovery Zones. "The overriding objective of the exemption is to encourage people to start rebuilding. We do not intend or expect to carry these incentives for ever."

Comments

rodentos 1 month ago

the Dorian SERZ is a joke - most of the time it is in place people were locked up in their homes due to covid. That was not the intention of the Dorian emergency order.

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DDK 1 month ago

The People of Abaco thank The Chamber Chief for his ongoing concerns about the recovery of The Forgotten Island (formerly the second largest tax-payer in The Bahamas)..….. Abaco business, struggling valiantly to recover, im spite of Dorian, covid19 and the bouncy-wouncy Bahamas government, is now battling a new stupidity called click 2 clear which is BAHAMAS CUSTOMS holding up the clearing of The People's inbound supplies for at least a month, because they can 😝😜😛😫😛😛😝

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DWW 1 month ago

hey numbnuts torqueman, check your own records before speaking. YOUR Inland revenue website clearly states it ended June 2020. then there was an extension to December 31st 2020 in the May budget contribution. does he think we are all plain stupid idiots? as they say: talk fool is fool.

this is the FIRST TIME there has been any official communication that the SERZ lasts until 2021. what kind of BS games are you playing? the people are wondering who they can vote for next election, they can't vote for the cookie jar crew and they sure don't want to vote for the clueless crew so what are the peeps to do pray tell?

https://inlandrevenue.finance.gov.bs/...">https://inlandrevenue.finance.gov.bs/...

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