The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The FNM’s deputy leader yesterday warned that Freeport’s new ‘tax breaks’ regime was unsettling the city’s major industrial investors, and urged: “We need less government, not more.”

K P Turnquest, the east Grand Bahama MP, told Tribune Business that the Grand Bahama (Port Area) Investment Incentives Act 2016 was further unnerving the industrial sector at a time when global forces were causing them to re-evaluate their presence in Freeport.

While not naming the companies involved, Mr Turnquest said they had spoken to him “unofficially” to express their concerns over an incentive regime that requires them to apply to the Government for renewal of tax breaks long enjoyed under the Hawksbill Creek Agreement.

“The industrials are now expressing concern as to what it means for them,” Mr Turnquest said. “They’re trying to understand how this thing is going to affect them.

“They’re already evaluating their value proposition, and whether Grand Bahama continues to remain a viable location for them for other reasons; where global changes have caused them to question whether this is still the right spot for them to be.

“When you add in this bureaucracy and things that are going on, people are questioning where this is going to end.”

Mr Turnquest’s comments imply that the Government is seeking to implement the Act, and its accompanying regulations, at the worst possible time for some of Freeport’s key industrial investors.

Companies such as Pharmachem, Polymers International and Buckeye Partners (BORCO) have been a vital mainstay of the city’s economy, propping it up and preventing the ‘bottom falling out’ amid the tourism industry turmoil over the past 13 years.

However, the May 4, 2015, expiration of the real property tax, income and capital gains tax exemptions previously embedded in the Hawksbill Creek Agreement has afforded the Government the opportunity to bring these incentives directly under its control.

It has done this by passing the Grand Bahama (Port Area) Investment Incentives Act 2016 last year, and tabling the accompanying regulations (although not gazzetting them to bring them into legal effect) in the House of Assembly earlier this year.

All Grand Bahama Port Authority (GBPA) licensees, including Freeport’s major industrial conglomerates, now have to apply to the Government for the renewal of those three key tax breaks.

This has seemingly introduced extra bureaucracy and costs, and uncertainty over whether licensees will actually receive the incentives, as this – together with the amount and duration – has been left to the discretion of the Investments Board and responsible minister.

Key questions also remain unanswered, the chief one being whether the Act ‘locks in’ all licensees to maintaining existing staffing levels for five years in return for renewal of these incentives.

The Act also suggests that companies which fail to meet this obligation face financial penalties, including the loss of some or all of their ‘tax breaks’, and the possibility that the Government may seek to ‘claw back’ these foregone taxes retroactively.

“While we ought to be looking after business we have, it seems as if we’re intent on putting more pressure on them and making it ever more difficult and unattractive,” Mr Turnquest told Tribune Business.

“The first rule of business is to keep the customers you have, as to get new ones is more difficult than maintaining existing ones.

“We seem to have forgotten that principal. We seem to be making it more difficult for the customers we have by forcing them to undertake development when the environment is not conducive for them at the moment,” he added.

“No one is going to invest in an uncomfortable environment if they don’t see a return. Putting additional costs or burdens on them is not going to make it more favourable; it’s only going to be making it worse.”

Prime Minister Perry Christie, in tabling the Act’s regulations, touted the legislation as securing both Grand Bahama (Freeport’s) economic future, as well as the welfare if its residents.

The Government has also promised that the Ministry of Grand Bahama will provide a ‘one stop-shop’ to facilitate investors and smooth the investment application process.

But to-date, based on private sector feedback and concerns, the Government has achieved anything but – and possibly the opposite of what it intended.

Mr Turnquest argued that the extra costs, bureaucracy and uncertainty being imposed on Freeport’s already-struggling economy, which is still reeling from the Memories and Grand Lucayan closures, plus the Vacation Express pull-out that has cost it 30 per cent of its visitor market, made a compelling case for less government intervention in the economy.

“At the end of the day, we need less Government; not more,” he told Tribune Business. “The present Government seems to feel that if they directly involve themselves it will make things happen more efficiently and quickly.

“History has not proven that to be the case. It has proven the opposite. The idea that this Ministry of Grand Bahama is going to improve the ease of doing business, and somehow investment is going to flood to the island, is not a panacea.”

The FNM’s deputy leader added: “We should be trying to reduce the footprint of government, lessen its control so that the market can move more freely, and reverse the economic model from where the Government is the largest employer to the private sector being the largest employer.”