By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Grand Bahama Port Authority’s (GBPA) former attorney is “completely disassociating myself” from an advisory suggesting Freeport businesses apply for renewal of their tax breaks, with some arguing that to do so is akin to “playing Russian roulette”.

Carey Leonard, now an attorney with Callenders & Co, told Tribune Business he was “astonished” that the Grand Bahama Chamber of Commerce had advised its members to apply for renewal of key tax exemptions via the Grand Bahama (Port Area) Investment Incentives Act 2016.

Mr Leonard said the Chamber was giving this advice despite not knowing what the GBPA’s 3,500 licensees will be signing up to, given that the duration and extent of any tax breaks granted is entirely at the Investments Board’s discretion.

He added that the Chamber also had yet to receive government answers to key questions, particularly whether those businesses not planned to expand within the next 12 months will be ‘locked in’ to maintaining current employment levels for the next five years.

Mr Leonard also told Tribune Business that by applying, GBPA licensees were effectively giving consent to potential “double taxation” through the imposition of real property tax on top of service charges currently paid to the Port Authority.

“Why would you sign up for something that you don’t know what you’re signing up for,” Mr Leonard queried to Tribune Business. “There is no criteria and no certainty. I disassociate myself completely from the letter sent out by the Government in its entirety.

“I’m astonished that the Chamber would advise its members rather than report to them. How can you be telling them to do this when they still have unanswered questions? The Chamber’s questions have not been answered. Why are they telling people to sign up?”

Mr Leonard was referring to the March 30, 2017, advisory sent by the Grand Bahama Chamber to its members, which advised that they apply for renewal of their real property tax, income and capital gains tax exemptions via the new Act’s mechanisms (see other article on Page 1B).

The Chamber advised its members that the $100 processing fee cost was an inexpensive ‘insurance policy’ against potential current and future taxation being imposed upon them.

Foreign-owned licensees are particularly vulnerable to real property tax, which the Chamber warned could be imposed against them retroactively for the past year to May 4, 2016, if they did not apply.

This category of licensee includes all Freeport’s major industrial investors, such as the Grand Bahama Shipyard, BORCO, Pharmachem and Polymers International, who, given their real estate holdings, could be exposed to multi-million dollar liabilities.

However, one Freeport businessman, speaking on condition of anonymity, said the numerous ‘unknowns’ associated with applying - especially the complete discretion granted to the Investments Board to determine which licensees were granted tax breaks, and for how long - meant it was not ‘inexpensive insurance’.

“Whilst I agree with the Chamber’s outline of the scenario, I do not agree with their position,” the businessman said. “It’s not cheap insurance; you’re betting on Russian roulette.

“You’re playing Russian roulette with $100, and we all know the house wins.’

Mick Holding, the Grand Bahama Chamber’s president, told Tribune Business that the concerns expressed by Mr Leonard and others were “very fair comments”.

Yet he added: “I would say that whilst there is no certainty as to how long anyone will get, and the criteria of decisions will be whatever it is, it gives protection for foreign companies.

“Even if they only get five years, it gives them breathing space to have discussions about what happens at the end of five years. My concern is that if they do not comply, they leave themselves liable for real property tax back to May 4, 2016.

“If it only buys them five years, they don’t have retroactive taxes to pay. That’s the basis of the recommendation, and these things are never simple.”

Mr Holding said there had been a meeting last Monday “with a good proportion” of Freeport’s industrial investors and larger foreign-owned businesses to discuss the new Act and its implications.

While some present needed further discussions with their parent companies, he added: “I think the consensus of opinion is that we’re better off applying than not.”

Mr Holding acknowledged that there had been “some talk” of Freeport’s major industrial investors lobbying the Government for the same blanket 20-year exemption as that granted to the GBPA and Hutchison Whampoa, but to his knowledge this had not occurred yet.

“I think they were looking to the Government to take a lead and continue discussions with the Government, which is what we’re trying to do,” Mr Holding said.

“I’m very pleased there’s been another month’s extension [of the application deadline to May 4] to enable some progress to take place.”

The Chamber president admitted, though, that he had yet to make progress in obtaining answers to the private sector’s questions, or gain a meeting with the Government, although “I haven’t given up on that at all”.

Mr Leonard, meanwhile, argued that applying for the tax breaks’ renewal was akin to giving the Government consent to impose real property tax at some point, even if the exemptions were granted now.

“If you are signing up, you’re saying to the Government you have the right to double tax me; we’ve agreed to pay you,” Mr Leonard told Tribune Business.

“It’s really a double taxation because businesses are already charged a service charge in Freeport. Service charges are a real property tax for the purpose of maintaining roads, verges and all forms of infrastructure.

“We’re already paying a real property tax. Whoever signs up is saying: Fine, charge me what you like, when you like, and however you like doing it. That’s the problem.”

Mr Leonard added that the threat of real property tax would also deter real estate developers and potential second home buyers from looking at Freeport as a place to invest, and ran counter to recommendations by the Government’s own adviser, Oxford Economics.

“I personally think the Act needs to be repealed or replaced with something better, or amended to that there is no real property tax fee for second homeowners,” he told Tribune Business.

However, another Freeport-based attorney, speaking in condition of anonymity, backed the Chamber and Mr Holding.

“If you don’t apply, you have to pay the tax,” they said. “The tax breaks went away. You had 30 years advance notice of that. If you want to pay the tax, don’t sign up.

“I’ve told all my clients that the facts are the tax exemptions went away. Why the hell wouldn’t you apply for an extension? Otherwise you just start paying.”