The Grand Bahama Chamber of Commerce’s president yesterday said it would be “disastrous” if the Government chose to levy real property tax on Port licensees post-August 2015, warning it would be “another nail in Freeport’s coffin”.
Kevin Seymour told Tribune Business that the city, and 3,500 Grand Bahama Port Authority (GBPA) licensees, did “not have the luxury of time” in waiting for the Government to make a decision on Freeport’s expiring investment incentives.
With potential investors said to be ‘waiting on the sidelines’ until the matter was resolved, Mr Seymour said Freeport and its private sector could ill-afford to wait on the Government’s consultants to provide recommendations on the way forward.
Describing 2015 as a “watershed year” for Freeport and Grand Bahama, the Chamber chief said it was vital for the Government to work with the island’s various stakeholders to turn its economy around, warning: “Failure is not an option.”
Mr Seymour said “senior level” officials had told him the Christie administration was waiting on the report by the global consulting firm, McKinsey, to determine its position on Freeport’s expiring investment incentives.
These incentives, which ‘sunset’ this August, include exemptions from real property tax and Business Licence fees (to central government), and several other tax breaks.
Mr Seymour said that while the unnamed officials had informed him that the McKinsey report’s findings would be made public, once it was received and analysed by the Government, “they didn’t give a timetable for when that would happen”.
He indicated that this only added to the growing uncertainty surrounding Freeport’s investment and business climate, with new and existing investors unwilling to initiate capital projects when ‘the rules of the game’ were not known.
“We’re going to have to continue to push them,” Mr Seymour told Tribune Business on the Government’s approach to the ‘sunsetting’ exemptions.
“We don’t have the luxury of waiting. We need investment, and need it to happen today, not months from now when the Government gets around to making a decision on this.”
The Chamber president said the growing uncertainty was already impacting Freeport’s economy, and its growth/job creation prospects, a trend that would ultimately lead to stagnation.
“There most definitely is concern, certainly, with the uncertainty surrounding the whole matter,” Mr Seymour explained.
“We are told there are investors standing and waiting for resolution of this before they pull the trigger, and rightly so. What investor is going to pull the trigger in an environment of uncertainty? We need to move with dispatch to get this resolved, and do it quickly.”
Mr Seymour, in a presentation to the Rotary Club of Lucaya yesterday, said the Chamber would partner with the GBPA, Grand Bahama Development Company (DEVCO) and licensees to lobby the Government to extend Freeport’s existing investment regime in its entirety to when the Hawksbill Creek Agreement expires in 2054.
Acknowledging that the Government would likely be “guided” by McKinsey’s findings, Mr Seymour told Tribune Business: “Notwithstanding what McKinsey might recommend, we believe it would be disastrous to follow the course of assessing real property tax on existing licensees of the GBPA.
“It would be, in our view, contrary to the Hawksbill Creek Agreement, at least the spirit of the agreement, and some licensees have already baked this benefit into their model for expansion going forward.
“If, at this critical stage, the Government decides to put an additional nail into the coffin of Freeport, I think it would be disastrous. We in the Chamber are going to do our part to lobby and ask members to come together as one voice on this issue.”
Mr Seymour added that the Grand Bahama Chamber would also push the Government to grant ‘VAT free status’ to services transactions between GBPA licensees, putting them on a level playing field with the tax’s treatment of goods.
He said the decision to make such services transactions ‘VAT-able’ “flies in the face of the spirit of the Hawksbill Creek Agreement, especially since physical goods imported duty-free under bond were not being subject to the new 7.5 per cent tax.
“There’s no reason, if the Government sees its way clear to treat Schedule 2 goods in a fashion where they are not VAT-able, why it’s not natural to have that extended to apply to services transactions between licensees,” Mr Seymour told Tribune Business.
Suggesting that 2015 would be pivotal for Freeport’s economy, Mr Seymour emphasised: “I think this is going to be a watershed year for Grand Bahama, and the cost of failure is not an option.
“We have to succeed in turning this situation around, and if the Government can work with the Port Authority, licensees and others on the island, we’ll have a good shot at doing so.”