By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An outspoken QC yesterday threatened legal action against the Grand Bahama Port Authority (GBPA) for levying Value-Added Tax (VAT) on his firm’s licence fee, accusing it of complicity in the Government’s efforts “to chip away” at Freeport’s founding agreement.

Fred Smith QC, the Callenders & Co attorney and partner, told Tribune Business that the 7.5 per cent levy showed the GBPA was becoming “a revenue collection agent” for the Government as opposed to defending its licensees’ rights.

While acknowledging that the $21 VAT charge on Callenders’ licence fee might appear insignificant, Mr Smith said the ‘bigger picture’ was that it represented a further attempt to “shave away” the Hawksbill Creek Agreement and GBPA licensee rights.

Mr Smith, in an October 20, 2015, letter to Nicole Colebrooke, the GBPA’s customer relations manager, warned that the Hawksbill Creek Agreement’s Clause 2.8 stipulated that no tax was payable on Port Authority licence fees.

Nor was there anything in Callenders’ licence to require the payment of VAT, and he added: “We have not agreed to pay this, and there is no lawful requirement for us to pay this.

“If the Government of the Bahamas insists that VAT is payable on licence fees, then it is for the GBPA to challenge the Government on this point. The GBPA is currently purporting to charge VAT that is not due.”

Mr Smith demanded that, by today, the GBPA confirm that no VAT was payable on the licence fee and “that it was a mistake to have charged it”, with the episode never occurring again. He is also seeking a refund of the $21 tax payment.

“Failing which, we shall seek a declaration of our rights and a refund thereof from you along with interest,” Mr Smith told Ms Colebrooke and the GBPA.

The QC later confirmed to Tribune Business that “this is a dispute brewing on whether or not VAT can be charged on Port licence fees”.

Referring to the ‘no tax on licence fees’ clause within the Hawksbill Creek Agreement, Mr Smith added: “Regrettably, neither the VAT Department or the Port Authority seem to have any regard for the Hawksbill Creek Agreement any more.

“It seems central Government, in collaboration with the Grand Bahama Port Authority, are determined to destroy the vestiges of any rule of law pursuant to the Hawksbill Creek Agreement in Freeport. And they intend to ride roughshod over the rights of licensees.

“The mere fact of Government demanding payment of VAT on licence fees, and the Port Authority rolling over and charging VAT on licence fees, shows the GBPA is only concerned with its own self-interest and profits, and it continues to allow Central Government to extract as many pounds of flesh from licensees as they can,” Mr Smith continued.

“As a licensee, I have requested the Port Authority to remove the 7.5 per cent VAT charge on my licence fee, and should they fail to do so, I will be issuing Judicial Review proceedings against the Port Authority for deciding to impose on its licence fees a 7.5 per cent VAT tax.

“The Port Authority has simply become a Central Government revenue collection agency, as opposed to protecting licensees from Central Government taxation.”

When asked by Tribune Business whether he was making ‘a mountain out of a mole hill’ over just $21, Mr Smith acknowledged that while Callenders’ Port fee was small, these could rise as high as $500,000.

“VAT on Port licence fees is a large potential revenue stream for the Treasury, and increases the cost of doing business in Freeport,” he told Tribune Business.

“And it continues to shave away the concept of Freeport as a trade and tax-free zone. The Government, with the quiet concurrence of the Port Authority, continues to chip away at licensee rights.

“Because it is a ‘pass on’ tax to the licensees, the Port Authority just looks the other way and demands payment.”

Criticising the GBPA for failing to protect its licensees against tax and “other regulatory incursions”, Mr Smith said: “Freeport will never boom again until Central Government stops interfering in its maintenance, and until it allows the GBPA to be the one-stop ship for investment and regulation, and holds the GBPA accountable for their administrative and development promotion obligations.

“It baffles me that the Government does not see how perverse their interference is, because if they would leave it to the GBPA and let Freeport grow, central government revenues would increase dramatically from $100 million to several hundred million dollars.

“It is just mind boggling how stupid central Government is about how business can grow in Freeport.”

Mr Smith added that if Nassau would just let Freeport go, the city would generate consistent annual revenue surpluses that could be used to finance the Government’s obligations in the Family Islands and elsewhere.