The Tribune

By Kevin D. Seymour

I read with interest recent newspaper articles giving the reaction of the now-former minister of state for Grand Bahama and finance, J. Kwasi Thompson, as well as a prominent Freeport attorney, to the prospect of the reintroduction of the Grand Bahama (Port Area) Investment Incentives Act 2016.

According to the prominent Freeport attorney, the Act was only repealed in substance, which in my view is potentially more perilous and damaging to the country’s reputation - and the Government of the Commonwealth of The Bahamas - than an outright repeal, which was believed by many to have occurred on October 18, 2017.

However, since it is a “new Day” in the country, which I’m certain will be accompanied by new thinking, I chose not to engage in a debate regarding the ‘pros’ and ‘cons’ of the Act, and will do my best to steer clear of the political land mines that may have been planted. Instead, I will use this opportunity as a teachable moment.

Successive governments over the last 60-plus years have entered into numerous agreements with foreign as well as local investors for various hotel resorts and golf courses, manufacturing and real estate developments, inclusive of second homes, throughout the length and breadth of The Bahamas. These agreements are often referred to as Heads of Agreement (HoAs) and, in the case of Freeport, the Hawksbill Creek Agreement (HCA), which was entered into by the then-colonial government back in August 1955. The HCA has a remaining life of 33 years. A number of these agreements also fall within the definition of public-private partnerships or (PPP) agreements. Although these agreements are tailored for a diverse number of investment projects as noted above, the common underlying theme is that, in exchange for the central government granting these various investors certain tax concessions and, in some cases, land grants, the investors in turn agree to build, develop and promote major touristic resorts; construct and operate manufacturing facilities; build second homes etc. consistent with the terms set out in their respective underlying HoAs. In essence, these agreements are based on the “quid pro quo” principle, where the investors give certain commitments and agree to carry out specific undertakings (constructing, developing and promoting a resort project, or constructing a second home within a specified period of time, or employing a specified number of Bahamians during the construction phase of a project and once the project comes to fruition etc, in return for the central government granting them these tax and other concessions.

Unfortunately, over the years, and due to a lack of robust compliance monitoring by the central government, investors have not always lived up to their commitments and undertakings under these HoAs. Surprisingly, certain of these same investors continue to enjoy generous exemptions from Customs, excise and stamp duties and real property taxes for periods of up to 20 years. Generally, there is no outcry from Bahamian taxpayers because, in most cases, they are either unaware or do not fully understand the real value of the various concessions granted by the central Government to these investors which, I might add, in the case of the larger investment projects are quite significant. As a result, successive governments have not been able nor willing to hold these investors accountable, and in the process may have foregone the realisation of millions of dollars in revenues, which could have resulted from a properly constituted and functioning compliance enforcement regime.

Hence the strenuous objections raised by the former state minister of finance and the prominent Freeport attorney appear to have missed entirely the reason why it is necessary for accountability to accompany tax and other concessions granted by the central government, whether under the terms of the HCA and ancillary legislation, or any of the multitude of HoAs currently in force. Instead, such monitoring is viewed by them and others as being contrary to ‘ease of doing business’ and subjecting the GBPA licensees to having to “beg the central government for the renewal of business license, real property tax, income tax and capital gains tax exemptions”.

HoAs and the HCA have undoubtedly proven beneficial for the development of The Bahamas over the years, and such investment incentive programmes should continue. However, in my view, successive governments have not fully leveraged these arrangements by ensuring that investors comply with their commitments and undertakings, and made accountable when there is a departure from them. This now, more than ever, has to change in order for our developing nation to realise its full economic potential.

Kevin D. Seymour

Freeport, Grand Bahama

September 18, 2021