Private sector backs six-month extension over GB tax breaks

Private sector leaders yesterday praised the six-month ‘tax breaks renewal’ extension granted to Freeport businesses, as it will give the Government time to make a “proper decision” on their replacement.

Mick Holding, the Grand Bahama Chamber of Commerce’s president, told Tribune Business that the extension to January 4, 2018, would enable all parties to have “a proper consultation” on what should replace the Grand Bahama (Port Area) Investment Incentives Act 2016.

The six-month extension from July 4, 2017, was unveiled last weekend by the Prime Minister, and Mr Holding said it “mirrored” advice given when the Chamber met Kwasi Thompson, minister of state for Grand Bahama.

“Excellent,” he responded, when informed of the decision by Tribune Business. “That mirrors the conversation we, the Chamber, had with the minister for Grand Bahama a few weeks ago.

“We recommended an extension from July 4 to allow that consultation process to take place. I think it’s very sensible for the Government to buy time to do the job properly.

“I’m very pleased they’ve made this sensible extension to enable consultation to take place, make the proper decision themselves, and put new legislation in place.”

Mr Holding said he was especially happy that the deadline had been extended through the 2017 year-end - a position backed by former Grand Bahama Port Authority (GBPA) counsel, Carey Leonard.

Mr Leonard, now an attorney with Callenders & Co, said of the extension: “It definitely helps the private sector. Yes, it buys more time, but it gives the private sector space to say: ‘This is our recommendation to you.

“It gives you the time, and the Government the time, to look at and make some sensible decisions. They’ve made it clear to to the business community, and in their manifesto, that the first thing they wanted to do was repeal and replace, so that’s very positive.”

Dr Hubert Minnis, in making the announcement, said: “My government has begun the process of replacing portions of the Grand Bahama Investments Incentives Act to ensure fairness.

“We intend to bring to an end the additional red tape and uncertainty, which is a road block to further investment in Grand Bahama. We will extend the need to submit applications for a period of six months, during which time this office will conduct consultations prior to implementing the final replacement.”

The Government, though, has yet to release details on the proposed replacement, how this will work and the potential impact for Freeport-based businesses.

The repeal of the Grand Bahama (Port Area) Investment Incentives Act 2016 was promised by the Minnis administration in the recent ‘Speech from the Throne’, with K P Turnquest, the deputy prime minister, previously branding the legislation passed by the Christie government as “a job killer”.

The Act’s introduction meant that the Grand Bahama Port Authority’s (GBPA) 3,500 licensees had to apply to Nassau for the renewal of tax breaks they previously enjoyed by right under the Hawksbill Creek Agreement (HCA).

The lingering concerns with the Act and associated application process involve uncertainty over the length of time for which the tax breaks will be renewed, and the fact this appears left entirely to the discretion of the Investments Board and responsible minister.

There is also the fear that GBPA licensees not planning to expand their business are effectively ‘locked in’ to maintaining their existing employment levels for five years in return for the renewal of their real property tax, capital gains and income tax exemptions.

The application form attached to the Grand Bahama (Port Area) Investment Incentives Act 2016’s regulations divides GBPA licensees into two categories: Those planning a business expansion within the next 12 months, and those who “expect to operate as a going concern and maintain current staffing levels for at least the next five years”.

The latter category appears innocuous, but when the application form is read with the Act, it effectively “locks in” GBPA licensees to maintaining employment levels for a five-year period regardless of whether there are further market or economic downturns outside their control.

Should a licensee be forced to downsize in those five years to survive, the Act’s section six, ‘Failure to fulfil obligations’, would appear to come into play.

This allows the minister responsible for investments to strip Freeport businesses, partially or in full, of their tax breaks, and even enables them to demand payment of taxes that should have been paid if no concessions were granted.

The Act enables the Minister to “reduce or revoke in full” the tax breaks granted, and even “demand payment in respect of any money that would have been payable had no concessions under the Act been conferred”. In effect, it demands retroactive or ‘back’ taxes.