GUALO RAI Saipan — A policy review group has recommended that the CNMI government overhaul its five-year-old tax incentive program citing the measure’s apparent failure to attract fresh investment and stimulate economic growth.
A report prepared by the Strategic Economic Development Council stated that due to a host of factors including the need to improve the understanding of the administering agency itself about the matter the CNMI government’s Qualifying Certificate program was only able to generate $2.6 million in non-retroactive investments — or an average of $526 000 a year.
Moreover the report citing a Journal news article of March 21 (See “Saipan hotels wish CDA believed in tax holidays ” stated that only two out of nine non-retroactive investment QCs have actually been accepted by applicants and that there had only been one new investors that had applied.
The SEDC report recommended that it be allowed to work with the Commonwealth Development Authority the administering agency and other stakeholders to ”amend the existing program or create and entirely new QC program based on findings” made by the body’s ad hoc committee formed to review the measure.
The SEDC also recommended that QC programs that have been successful in other locations be reviewed.
Stephen A. Brock outgoing country manager for the Northern Mariana Islands for Bank of Hawaii who chaired the ad hoc committee said in the SEDC report he had presented to various business groups including the Saipan Chamber of Commerce that Public Law 12-32 the “Investment Incentive Act of 2000” that created the program has a lot of rooms for improvement. “The committee not only believes that the program can be improved but that it must be improved…to meet the stated goals and objectives ” he said.
The ad hoc committee’s findings:
CDA’s mindset and understanding of the value of investment incentives and the multiplier effect of investment on a macroeconomic scale may need improvement.
There are concerns by CDA and the Babauta administration that providing tax abatement rebates or reductions will erode the current tax base.
There are “add-ons” or additional requirements imposed on an applicant for approval of a QC that the committee believes are outside the scope or authority of the QC law and regulation and can create competitive disadvantages for QC applicants as well as greatly reduce even eliminate the tax incentives.
There is a lack of flexibility in the process of negotiating between parties.
Application fee including a separate $10 000 for a new application covering a small change is a potential barrier as the fee appears to have no relationship to the actual expense of reviewing the application.
There are conflicts in the existing language of the law’s provision on confidentiality where it essentially states that the CDA board may release an applicant’s confidential information.
The committee also noted that allowing the office of the governor to have sole authority in approving QC applications “brings the appearance of politics entering into the decision process.” MBJ