By NEIL HARTNELL
Tribune Business Editor
DR HUBERT Minnis last night branded assertions by government officials that “nobody is losing anything” from the extinction of Over-the- Hill ‘tax free’ zones as “the biggest nonsense I have ever heard”.
The former prime minister sought to mount a vigorous defence of the Economic Empowerment Zone legislation passed under his administration amid arguments by current ministers and senior civil servants that it failed to achieve its objectives with most Over-the-Hill businesses and residents unable to access the incentives on offer.
With Dr Minnis accusing the Davis administration of reimposing “taxes on the poor” by killing-off the Empowerment Zone legislation through failing to renew it once it expired on June 30, 2023, the Government’s top finance official reassured that merchants, property owners and households living in those areas can still access the same tax breaks via other incentive-related
“The benefits in that Act were not unique to that Act,” Simon Wilson, the Ministry of Finance’s top official, told this newspaper. “The benefits are still available under the Tariff Act and other Acts. Nobody is losing anything. They are still available. Businesses that apply for the benefits are granted them under the Tariff Act and other legislation.
“The Economic Empowerment Zone legislation did not provide new benefits. It took benefits that existed under the Tariff Act and other pieces of legislation. People didn’t access it because they were getting the same thing all along. It wasn’t accessing something they couldn’t get before under the Tariff Act.”
Mr Wilson also suggested there was relatively minimal use made of the Customs duty, real property tax and Business Licence fee waivers by entities and persons living in the targeted areas because the same tax breaks already existed.
And he added that many businesses were unable to make use of the real property tax exemption because they either did not own the buildings they operate from or the value was below the then- $250,000 threshold at which tax became payable. “There was no scramble of persons coming looking for benefits,” Mr Wilson added.
Michael Halkitis, minister of economic affairs, went further at the Prime Minister’s Office’s Friday media briefing by suggesting that the Over- the-Hill tax breaks initiative was politically motivated through its focus on constituencies then-represented by FNM MPs and the exclusion of Englerston, whose MP is now-minister of education, Glenys Hanna Martin.
And he also argued that
the Economic Empowerment Zones had, instead of reviving inner-city areas of New Providence by stimulating economic activity and job creation, resulted in gentrification because existing businesses in those locations were unable to access the tax breaks.
Instead, Mr Halkitis argued, it was “one or two large businesses” that had moved into Over-the-Hill areas and exploited the incentives - something that can lead to gentrification, where existing businesses and residents are pushed out and displaced from an area by wealthier rivals who are attracted to relocate there by the economic benefits on offer.
This, though, was branded “total nonsense” by Dr Minnis, who challenged Mr Halkitis to name the large businesses he was referring
to. And the former prime minister pointed to clauses in the Economic Empowerment Zone legislation that prevented companies with annual turnovers greater than $5m, such as Super Value and the commercial banks with branches in those areas, from accessing the tax breaks.
Dr Minnis also pointed to the 2020 annual report by the Prime Minister’s Delivery Unit, which touts that up to $2.5m worth of tax breaks were awarded to qualifying firms and property owners up to October 2020, as evidence that his initiative was work- ing and to debunk the current administration’s criticisms.
The report shows that $2.5m was broken down into $1.445m worth of real property tax waivers; $329,284 in building materials concessions; $89,607 in foregone Business Licence fees; and the balance representing tax breaks on commercial vehicles. Companies in areas designated by the legislation were able to obtain import duty waivers on vehicles, equipment and inventory for their businesses.
“In 2020 alone people took advantage of about $2.5m incentives,” Dr Minnis told Tribune Business. “We had about 49 individuals wanted to start businesses, and we gave them grants to the tune of about $122,000 from the Small Business Development Centre.
“Those individuals went on to generate $4.8m in revenues. The concessions were valued at $2.5m but those businesses - those 49 individuals - generated $4.8m in sales alone and created 142 jobs, so it was working. Those 142 persons, if they were not working, might be a problem on the street.”
Dr Minnis argued that the Davis administration’s decision not to renew the Economic Empowerment Zone legislation had cost jobs and deterred impacted businesses from expanding, although he did not identify any by name.
“I said in Parliament that the PLP are always talking about how they are for the poor and marginalised,” the former prime minister argued. “We made the inner-city a tax-free zone with no property tax, no Business Licence fee. Only VAT they pay.”
Pointing out that the Davis administration had extended tax breaks and incentive legislation for Bay Street and the surrounding areas, via the Downtown Nassau Revitalisation Act, he added: “When we were in office the PLP used to beat us every day: ‘When are you going to expand it into Englerston and other areas?’
“But, just in the last year, they stopped the inner-city tax-free zone. As a result of that, businesses who had taken on extra staff had to lay them off because they were depending on those incentives. They couldn’t expand their businesses. Some of them had containers on the dock that they were having great difficulty in clearing because they now had to pay Customs duties.
“Indirectly, they introduced as a tax on the inner-city. Bay Street’s was renewed, but they didn’t renew the inner city. It
expired on July 1. They had a chance to renew for five years and no one beat them on it because that is a tax on the poor. Here it is. When they were in Opposition they were beating us for not expanding it quick enough to Englerston and other places, and they came in and cancelled it.”
Dr Minnis said he recalled that legislation had been drafted prior to the 2021 general election to extend the Economic Empowerment Zone legislation beyond Over- the-Hill to other “poverty stricken areas” of New Providence such as Kemp Road, Fox Hill, Pitt Road in Fort Charlotte and Gambier Village. He argued that all the incoming administration had to do was pick it up and pass it.
“They cannot show any evidence of gentrification,” the former prime minister argued. “I spend a lot of time in the inner-city, and they would come and inform me of the challenges they were facing. They didn’t take it from Bay Street, but they took it from the poor man. Why take it from the inner-city rather than extend it?”
Mr Halkitis, at Friday’s briefing in referring to Dr Minnis, said: “I think he’s talking about what he termed the Over-the-Hill initiative. If you recall, there was a lot of controversy when that was done, because it did not include all of Over-the-Hill. It included some selective constituencies.
“And, if you remember, our member of parliament at the time for Englerston, who is still the member of parliament for Englerston, was very critical that she felt that it included areas like Bain Town, Centerville and St Barnabas that were at the time represented by FNM members of parliament where she, being a member of parliament for Englerston, which is the same demographic, the same area, same people so to speak, was excluded. And so, it was very controversial.”
Mr Halkitis explained that incentive legislation is usually evaluated after a period of time and, although the Economic Empowerment Zone initiative was intended to help inner-city residents develop their businesses, they found large companies from outside entered the area to take advantage of the tax breaks on offer.
He said: “Legislation of that sort, which we call incentive legislation, is often brought in with a sunset clause, meaning it might come in and, say, it lasts for one year. And the intention is that you will during that year, or that period that law is in effect, you would gauge the impact and see how successful is it in achieving what we intended.
“I guess the intention was to help people to develop their properties. But what we found was that people who were, by and large living in the area, if they own the property at all they did not have the financial wherewithal to make an investment.
“And so you have one or two large businesses come in and take advantage of the investment. And you can see some of them, if you cruise over the hill, certain areas over there you can see some big businesses that were able to come in and take advantage of the tax-free incentive.”
Mr Halkitis said the Small Business Development Centre (SBDC) offers tax concessions to help all small businesses, and the Davis administration felt this was a “much more effective tool” than the Economic Empowerment Zone legislation to aid entrepreneurs.
He said: “So we felt that that was not achieving its intended consequence. Also implemented was the Small Business Development Centre, which allows small businesses to get, also by the FNM, duty-free concessions on things like inventory and vehicles and equipment for their business. If you have a business, small business under $5m.
“That applies everywhere. And so we think that’s a much more effective tool to bring that sort of relief, particularly to the small business owner. We renewed that, and we allowed the other one to expire because it is not having, in our opinion; it’s not having its intended consequence.
“It sounds good. And so sometimes it might be a useful political tool to beat us. But you have to be able to look at what was the intended consequence. Did it achieve those intended outcomes and is there a better alternative?”