The Tribune

• Ex-GBPA attorney warns it will ‘kill investment’ if stays

• ‘Serious deficiency’ that not replaced by Minnis Gov’t

• But tax breaks ‘handed on silver platter’ to Hutchison

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Freeport’s 2016 investment legislation is “an absolute disaster” that must be repealed if small and medium-sized businesses are to invest in the city, a prominent attorney warned yesterday.

Carey Leonard, the former Grand Bahama Port Authority (GBPA) in-house counsel, told Tribune Business prior to confirmation of last night’s general election results that the incoming administration will “absolutely kill any investment” if it seeks to revive the Grand Bahama (Port Area) Investment Incentives Act 2016.

Chester Cooper, the Progressive Liberal Party’s (PLP) deputy leader, has already pledged to revitalise the Act, but Mr Leonard said the effect would be to make the vast majority of the GBPA’s 3,500 licensees “beg” for the renewal of business licence, real property tax, income and capital gains tax exemptions.

Faced with the prospect of double taxation, given the licence fees and service charges already paid to the GBPA, he added that the resulting uncertainty only served to discourage investment and job-creating business expansion in The Bahamas’ second city. 

While Kevin Seymour, the ex-Grand Bahama Chamber of Commerce president, recently said the 2016 Act had been repealed but not replaced by the Minnis administration, Mr Leonard argued that the reality is slightly different. He asserted that the legislation remains on the statute book, with the Minnis administration instead having passed annual measures that stopped it coming into effect.

“If you revive that you will absolutely kill any real investment,” Mr Leonard warned the incoming administration on the 2016 Act. “You’re creating a process where everything a business does, you have to run to the Government and ask them first. You have no certainty. There’s no certainty with that Act at all. 

“The Act is an absolute disaster, and was never done with the purpose of looking at how to develop Grand Bahama. It was done with the idea of how to tax people. That’s what it amounted to when you read it.” 

Asserting that the failure to replace the 2016 Act is “a serious deficiency” that the next government must correct, Mr Leonard added: “The implication, quite frankly, is that anybody that wants to do a second home investment, there’s no sense in them doing it. The reason is that you could be double taxed as there’s no certainty you would get the real property tax exemption.

“Instead of knowing if I do this, that and the other I will get a), what winds up happening under the Act that I call the ‘Disincentives Act’ is that you get a real property tax exemption when you make an application to the Government. You don’t know what the criteria is that they will dream up.

“There are too many variables for someone to make an investment. There’s no certainty in it because you have got to go in and beg someone to make a decision.”  Mr Leonard accused the Minnis administration of “in effect, kicking the can down the road instead of dealing with the problem”.

The Grand Bahama (Port Area) Investment Incentives Act 2016 was met with furious opposition and resistance from many in corporate Freeport when it became law. This was because it would have forced all the GBPA’s 3,500 licensees - bar the Port Authority, its Hutchison Whampoa partner and their combined business interests - to apply annually to the central government in Nassau for the renewal of key tax breaks.

The former Christie administration sought to tie their grant/renewal to the amount of investment involved and companies avoiding job cuts by maintaining their existing workforces for five years. It also threatened to impose financial penalties on businesses who failed to live up to the promises they made in return for receiving the renewed tax breaks.

The 2016 Act was also seen as an attack on Freeport’s founding treaty, and an attempt to undermine the Hawksbill Creek Agreement, by forcing GBPA licensees to apply to Nassau for benefits and rights this already provided them.

Mr Leonard said some of the criteria, especially the guarantee of no lay-offs, would be impossible to meet - especially in a COVID-19 environment. Instead, he urged the new administration: “You need to introduce a piece of legislation to encourage people to build homes and give businesses a very large degree of certainty for 10-20 years.

“At the moment, your discouraging medium-sized enterprises from coming to the country, developing and employing people. The danger of relying on big companies only is when something goes wrong, as you feel it more than anywhere else because you are so reliant on big business....

“It does not represent a good long-term strategy. You need businesses that are small enough that they must make it work. With big multinational corporations, if there’s a particular area that’s not working, they don’t say they must do this to survive; they say shut it down and go somewhere where they can make money. I want the person who says they’ve go to make it work, and have to make it work. That keeps jobs and the economy going.”

Mr Leonard added that he found it particularly galling that the 2016 Act had renewed the tax breaks for the GBPA, Hutchison and all their affiliates while leaving all other licensees to run to Nassau to beg for the renewal of theirs.

“That particular Bill gives a free ride to Hutchison, the Port Authority, and Grand Bahama Development Company (DevCo),” he told Tribune Business. “All the people who have not been doing their job have been congratulated and given the pie. What’s that telling everybody else?

“Others have had to beg for the exemptions, whereas you are handing them on a silver platter to others and giving them a free ride.... A lot can be done, and if we want Freeport to operate as it can do, the potential is still phenomenal. We have the land space, but everyone has to pull their weight and comply with what they covenanted and agreed to do.

“There are a lot of businesses here working very hard, but their life has not been made easy because a lot of things have not been done as they should have been.”