Contributing Editor: Ms. Kay Menzies, President of BCCI
While no statistical data is available to allow us to quantify the economic impact of crime, we do know from our own experiences that besides the obvious emotional, psychological and social consequences, there are costs to business and to the broader economy. In our businesses, we know the added expenditures we've made for security, the changes in hours some of us make, the changes in delivery routes and schedules others of us make, the added insurance costs we all face. It's impossible for me to list all the effects crime has on the cost of doing business, but you know them all too well. So what do we do about it? We all have answers to that question, but if the solutions were easy, we wouldn't be talking about crime in the same way, would we? The tones of frustrated, impotent anger have overtaken the national discourse. We are all victims, and we all know victims, and we don't feel we have the power to stop the sprint to the bottom. I don't have any better answers than anyone else does, but I do know that we can't do it alone. I know that this, as much as (or maybe
more than) any other problem in our society requires us to work with the government and the government to work with us. Speeches telling each other whose fault it is are all very well, but our civic duty is not and cannot be law enforcement. We in the private sector, if we are allowed to do what we do best, are the job creators and revenue providers. Whether a business has one employee or 100 employees, it is a job creator, and as such should be valued for its contribution to society and the economy. And as long as that business pays its legally mandated share of taxes and fees, it should be valued for its contribution to society and the economy. Cont. unto the next page.
Industry Perspective page 6
Membership Perspective Page 8 Human Resources Perspective Page 10
Contributing Editor: Ms. Kay Menzies, President of BCCI
Now that we've established that businesses should be valued for making even the most basic of contributions to society and the economy, we move on to productive citizens. These are the people who live as law-abiding members of society, the people who work hard to put a roof over the heads of their families, who raise Peaceful Candle light vigil for murder victim, t h e i r Jasmine Lowe, by concerned citizens children and educate them to the best of their ability, who pay their legally mandated share of taxes, who don't litter our streets. These citizens set positive examples for others, including their children, to follow. They absolutely must be valued for what they do. They are who we need if Belize is ever to fulfill her potential. Government provides, in this case, the guardrails that keep society on the right track. We pay our taxes so that those taxes can go toward, among other things, financing the upkeep of the fences that keep good neighbors being good neighbors. What I mean by this is that the police force exists to maintain good order and discipline through the enforcement of the laws that keep our society running smoothly. When someone goes off course, i.e. breaks the law, we as citizens have a duty to report that person, the police have a duty to act according to the penalties provided for that particular instance of going off course, and the prosecution with the help of the judiciary then ensures that the proper punishment is levied once the person in question is proven guilty. Somehow this has all gone badly wrong, and so businesses are spending money on security procedures instead of 2
creating jobs, citizens live in fear of becoming crime victims, and the national wave of anger is drowning us all. From my perspective, there is a required balance. As we work to provide jobs and raise our children to be good, productive citizens who report crimes and avoid committing them, the absence of safety and security will lead to one or maybe all of these things: 1) people will continue to find new and stronger ways to protect themselves, which can eventually lead to unfortunate incidents of vigilantism; 2) business and personal success will create more victims for an uncontrolled criminal population to prey on; 3) the formerly contributing businesses and citizens will seek a better life wherever they can find it, exacerbating the job -and brain- drain.
There exists no objection to Belize attracting “new capital investment” however concerns arise over the extent of the fiscal incentives that we are willing and able to offer to attract prospects. Over the past two decades Foreign Direct Investment (FDI) has been recognized as an important factor in the economic development of countries. The purpose of a direct investment is to gain enough control of a company to exercise control over future decisions. Coupled with the gradual reduction in barriers to foreign investment and trade in other states with similar attractive features this has lead to active competition amongst host countries. To promote themselves as investment locations more and more countries have resorted to tax incentives as part of their promotional efforts. This is of-course despite the debate about the efficacy of tax incentives as a determinant of FDI. On Friday 28 September, 2012 the Government of Belize passed the Sugar Industry and Cogeneration Project Development Incentives Bill 2012. The Government of Belize’s (GOB) justification for tax, duty and exchange control exemptions, and the removal of export restrictions for Belize Sugar Industry (BSI) and the American Sugar Refinery (ASR) is to “attract new capital investment to rescue and rehabilitate the sugar industry and restore continued development of the cogeneration energy project.” GOB believes that the industry plays a pivotal role in the economy and wellbeing of Belize and cites BSI’s severe financial difficulties as a “Result of the global economic recession.” These difficulties, GOB believes, “Threatens the livelihood of a large section of Belizeans.” A quick examination of the major contents of the Sugar Industry and Cogeneration Development Incentives Bill 2012 reveals that GOB is offering an attractive Business and Income Tax exemption to BSI and ASR who own 21.8% and 78.6% of equity
respectively in the company’s shares. Following a four year retro-active exemption from Business and Income Tax for 2008 to 2012 the company will not start to pay 100% Business and Income Tax until 2017 this is because the Bill provides for an incremental 20% increase in the rate of Business and Income Tax payable for the period 2013 to 2016. In 2013 GOB will collect 20% of Business and Income Tax, 40% in 2014, 60% in 2015, 80% in 2016 and 100% in 2017. The mention of a retroactive exemption raises speculations. Why would GOB grant an exemption of payment on taxes for a period that had already passed? Shouldn’t these monies be in GOB’s coffers by now? One explanation is that the provision for retroactive exemption from Business and Income Tax for the period 1st January 2008 to 31st December 2012 would cancel an outstanding debt that BSI owed to GOB and the matter could be thrown out of the Supreme Court. The amount of business tax in dispute is $1,710,109 for the period January 2008 to September 2011, which according to BSI, it does not owe GOB because of previous exemptions. The income tax department however, wanted the matter settled saying that exemptions were granted to BELCOGEN in the BELCOGEN Cogeneration Act of 2005 and not BSI meaning that BSI should pay. In addition to the Business and Income Tax exemption a 50% exemption will be granted on stamp duty payable which is the tax placed on legal documents usually in the transfer of assets or property. The transfer of documents in locations where this law exists is only legally enforceable once they are stamped, which shows the amount of tax paid. Stamp duty payable on cancellation or assignment of existing security documents and other instruments necessary to give effect to the acquisition of the shareholding in BSI by ASR or its affiliated companies will be granted a 50% exemption. This could be considered a fiscal incentive
Cont. from page 3
to attract the investor since transaction costs are likely one of the biggest barriers to investing in international markets. BSI and Belcogen shall (also) be exempt from all exchange control restrictions for a period of ten years with effect from 1st September 2012 which is to say that GOB will lift restrictions on the movement of currency between countries i.e. Belize and the investor’s home country, and facilitate BSI and Belcogen exemption from all exchange controls. Such arrangements can facilitate easy repatriation of funds to the investor’s home country without restrictions. In the Bill there is no provision for re-investment in the industry or Belize implying that large amounts of revenue generated by the sugar industry can easily be transferred outside of Belize. As of September 1st, 2012 BSI has unrestricted right to export raw sugar and molasses until September 2022, a period of 10 years, subject to the satisfaction of local market demands. Usually export restrictions are put in place for environmental reasons or to preserve natural resources. Some quantitative export restrictions include quotas, export taxes, duties and mandatory minimum export prices. With all of these restrictions relaxed in this Bill it becomes evident that there is need for regulation of the sugar industry. There exists an ongoing debate over the efficacy of tax incentives to attract foreign investment. In a public information notice on the Caribbean released on October 5, 2007 the International Monetary Fund (IMF) warned against relying on tax incentives to attract investment saying that they are costly in terms of foregone revenues. The IMF believes that other efforts to attract investment maybe more effective considering institutional quality, infrastructure and governance. Major reasons brought against tax incentives
to attract FDI are the economic cost where incentives exist for some but not for all, disturbing the allocation of capital. Second there is also the cost from revenue foregone through the granting of tax concessions and exemptions. Thirdly, there is administrative cost to granting these incentives. Fourth there is the social cost related to corruption, especially when tax incentives are granted on a discretionary basis rather than automatically. One of the greatest concerns for social partners is the cost from the revenues foregone. A retroactive write off of $1,710,109 in Business and Income Tax for BSI for the period January 2008 to September 2011 to begin with, followed by five more years without full payment of these Taxes begs the question, “How will GOB finance these foregone revenues?” “Will this sink us deeper into indebtedness and increase the countries national deficit? These are certainly questions that merit some answers. On the other hand, incentives may exist for some but not for all. Erosion of the revenue base can occur due to tax payers abusing the tax incentives regime to avoid paying taxes on non qualifying activities or income. Revenue losses can result where tax payers disguise their operations to qualify for tax benefits. For example, if tax incentives are only available to foreign investors, local firms or individuals can use foreign corporations through which to route their local investments. Other leakages occur where taxpayers use tax incentives to reduce the tax liability from non-qualified activities. Even where activities are separated it is very difficult to monitor related party transactions to make sure that income is not shifted from a taxable firm to a related firm that qualified for a tax holiday. Tax incentives also impose administrative costs on tax
Cont. from page 4
payers. The administrative costs will vary by type of incentives as well as the qualification process, monitoring and reporting requirements. Some studies pass a more critical judgment with respect to the administrative cost involved. The difference in cost is also difficult to measure as it depends heavily on factors like degree of efficiency of the administration and the degree of control pursued. A study by Morisset and Lumenganeso sponsored by the African Region of the World Bank elaborates that the level of administrative costs is positively correlated with corruption incidence and exhibits negative correlation with the quality of governance, degree of openness and public wages.
administrative costs and rampant corruption. Only then will these investments be in the best interest of both the Investors and the host country.
Finally, what is clear is that the opportunity for corruption is much greater for tax incentive regimes where officials have wide discretion in determining which investors or projects receive favorable treatment. Consider the social cost attributed to corruption that will arise from the discretionary issuance of these incentives. Without provisions for automatic issuance of these tax incentives after fulfilling requirements laid out in criteria, doors are open for rampant corruption. The potential for abuse is greater where no clear guidelines exist for qualification. In conclusion, with the proper framework governments can attract foreign direct investment and still compete on the international market. The FDI does not have to be to the detriment of the host country if well negotiated. A stable investment climate, improved infrastructure and institutional quality along with strides towards good governance will also appeal to prospecting investors. In the end governments must ensure that polices are in place to safeguard against excessive erosion of the revenue base, high
Greening, is spreading, draping the industry
mid-afternoon, passing by a school, and seeing
in a cloud of uncertainty. What is sure is that
all those students heading home from a day at
more effort is needed to control this killer.
school, I realized what a huge amount of energy
World prices are high and the opportunity for
is stored up in these students, students who are
expansion is enormous.
being trained to release their energy in a productive way. A good place to put this energy to use is in the agro-industry sector. With their entire life still before them, all the opportunities around them should look inviting indeed. There are so many new things happening in the agro-industry at this moment that will change the landscape of the agro-industry significantly. Sugar
The sugar industry is seeing the biggest change.
The cattle industry is definitely going through
With ASRâ€™s (American Sugar Refiners) new
a very significant change. With the initial pilot
investment in BSI, and with major expansion
testing project nearing completion in Blue
plans in the pipeline, the days of the old BSI will
Creek, cattle will soon flow across the border
perhaps only be a memory in a couple of years.
into the promising Mexican market with
While sugar traditionally is only grown in the
better prices than ever. Various buyers have
north, a new plant is sprouting in the west. With
already met with the producers to be ready
a proposed investment in excess of $100m, once
when the final approval is completed
in production, this plant will have an impact on everybody living in the west. With the possibility of tripling our sugar production, we should have more negotiating influence in international markets.
Grain Production Grain prices are high worldwide. Shortages are predicted by some experts. While our inputs into grain farming are high and our
yields less than many of our competitors, our
While the citrus industry at this moment has its
quality unquestionably ranks with the best.
own internal squabbles, the silent killer, Citrus
Looking at all of the opportunities available,
Cont. from page 6
any young man should look forward to building a home, creating a business, having income enough to sustain his family and expanding his business, becoming affluent and influential in society around him. But why, in spite of almost endless opportunities, do so many of our young people choose the path of crime? Do the old criminals do a better job at passing on their trade than us in the legitimate business? Or does our education system portray these opportunities as being out of reach for the young people? Until we will find a more effective way of having our young people challenge these opportunities, most will go into history unchallenged and we will fail to become the great nation we all envision. Let us all embrace the task of creating more hope in our young people and show them that these opportunities explicitly are there for them. Only after we will see a drop in the number of young criminals can we credit ourselves with any success.
“To Connect, To Capacitate and To Champion” is the driving force behind the Chamber’s machinery that works on a daily basis to bring enhanced services to its members, which has been achieved through synergistic relationships with governmental and social stakeholders. In the past couple of months, the Chamber has done quite a bit of networking to create opportunities for members via meetings held with Mr. Rodrigo Dos Santos A. Garcia, Economic & Commercial Counsellor for the Walloon Region of Belgium, who expressed great interest in creating business matching opportunities for Belgian companies and Belizean businesses. Members were informed and given an opportunity to take advantage of the various prospects that Mr. Garcia’s visit afforded them. In addition, members from the commerce sector were given an opportunity to meet with Mr. Delroy Walker from ADMT Green Technology, to discuss retail possibilities for green technology products in Belize. Furthermore, the Chamber held its largest flagship event – EXPO Belize Market Place that sets the stage for the biggest commerce market to be in one location in Belize for suppliers and buyers of goods and services to interact. Mixers were also held in addition to B2B meetings to enlighten the public discourse and to give members a platform with which they could publicly express their views on issues affecting them on a micro-level. Representatives from the Department of Sales Tax met with members to discuss “General Sales Tax” and Mr. David O’Donnovan, Director of Investment Promotion Agency Development at Communique International, gave a presentation to Chamber members on “How a Small Country Transformed Itself – The Case of Ireland and the
role FDI played in that Transformation.” This presentation was very beneficial, since it showed how a country on the brink of utter chaos was able to transform itself through the collective consciousness of a people finally ready to work together toward the common goal of making Ireland a more attractive place for investment; as well as, ensuring that good government programs have continuity and using the strategy of dividing the country’s work program into functional arms that are independent of political interference. The long and short of it was that Ireland was able to transform itself into a very successful country. In fulfilling the mandate to capacitate, the Chamber in conjunction with the International Labour Organization (ILO) hosted a two day seminar entitled “Belize Labour (Amendment) Act 2011” where the following was discussed: Overview of Industrial Relations, Sensitization on Discrimination at the workplace under the Decent work Country Program, Key Provisions in the OSH Bill, Clarifying the Labour Amendment and Responsibility and Cost Implication for Employees and Employers. In parallel with this
seminar, the Chamber kept a robust training calendar active with monthly training offerings raging from “How to Prepare a Budget” to “Strategies for Critical thinking” among other topics. Letting the voice of the members be heard in key
Cont. from page 7
circles is very important to the overall success of the advocacy arm of the Chamber. Both the Chamber and the Belize Business Bureau came together to jointly elect a business senator that would represent the sentiments of the business community on a national platform. The Chamber also met with the Ministry of Tourism and BTB in regards to the National Tourism Master Plan, with the Department of Customs in relation to the Senator Mark Lizarraga roll out of ASYCUDA and the various glitches that created problems for members getting their goods to market, as well as met with the Mayor to discuss the Municipal Bond. Equally important were meetings held with Mr. Jose Trejo, the Director of the Bureau of Standards who met with the Chamber to discuss new strategies to improve “Supplies Control” for businesses and Mr. Miguel Cabal, Economic Analysis Consultant, who discussed CENPROMYPE, which is a regional database to support the development of MSMEs and improve their competitiveness through innovative development tools. The Chamber has indeed been working in various aspects to enhance value for our members and continues to do so in the three critical areas of the organization’s mandate – To Connect, To Capacitate, and To Champion.
The dynamics of the Chamber staff has been evolving over the past year. We have had a change of leadership since December 2011 when we welcomed Mrs. Kim Aikman to the post of Chief Executive Officer. Mrs. Aikman has been with the BCCI for 5 years and she rose to the ranks for CEO. She brings with her fresh energies and ideas on how to chart the course for moving the BCCI forward during these challenging times in our country, Belize. She possesses immense strength in sales and a strong track record in membership growth and retention. Mrs. Aikman has and continues to be very instrumental in advocating on behalf of the best interest of employers and the business community. This was evident in the passing of the Amendment to the Labour Act of 2011 into law.
Join the Chamber today . . It makes dollar$ & Sense! As the voice of the private sector, the chamber offers active advocacy, meaningful networking, capacity building opportunities and a vehicle to positively influence the private enterprise system and the wider community in which we operate and live. The BCCI—Taking Care of Business!
We said goodbye to the former CEO Mrs. Celene Cleland Gomez who relocated to Barbados. We also bid adieu to our Mrs. Venetia Eck Salazar, the former Chief Policy Analyst who was integral in providing research to enable the BCCI to put forward informed positions. Mrs. Vanessa Vellos Peyrefitte also moved on, Mrs. Peyrefitte was the Director of Member Relations. We wish them all the best in their endeavors. On October 1, 2011 the BCCI welcomed Mrs. Marilyn PineloLee to the post of Chief Policy Analyst. As you know, the Chamber is a key agent in ensuring the health of the private enterprise eco-system and Marilyn’s role is to ensure our interventions are evidenced based, accurate and effective. Mrs. Lee possesses a Bachelors of Science Degree from the University of Belize and most recently a Master of Science in Economics from the University of the West Indies. We welcome her to the BCCI family. As 2013 rolls around we close taking strength from the following quote. We at the secretariat will do our part in ensuring that we provide the best possible service to you, our members. “There is no medicine like hope, no incentive so great, and no tonic so powerful as expectation of something tomorrow.”
The Business Perspectives is compiled and produced by the BCCI Secretariat Editor-in-Chief: Mrs. Kim Aikman Design & Layout: Vanessa Peyrefitte Delmi Novelo Producer: Kim Aikman Contributing Editorials Ms. Kay Menzies Mrs. Marilyn Pinelo-Lee Mr. Allen P. Reimer Mrs. Vanessa Peyrefitte Mr. Clinton Williams
- Orison Swett Marden equipment Copyright 2009, All rights reserved
Published on Dec 4, 2012
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