05252023 BUSINESS

Insurer uproar on Gov’ts

investment ‘dictate’

By NEIL HARTNELL

BAHAMIAN insur-

ers yesterday blasted the Davis administration for seeking to “dictate” their investment strategy by mandating that a “minimum” 50 percent of their total portfolio be held in government securities.

The Bahamas Insurance Association (BIA), in a letter issued yesterday to the sector’s regulator, warned it has “grave concerns” with a proposal - seemingly suggested by the International Monetary Fund (IMF) - that could ultimately “lead to the collapse of the industry” by disrupting its ability to match assets, and the returns they generate, with its liabilities as they mature.

The industry body also argued that mandating insurers hold at least half

their investments in government paper will create “a false market” for these securities, as well as lead to potential “rate fixing” and the “creation of a pricing monopoly” in the Bahamian dollar debt market.

The BIA hit out in response to a letter from Michele Fields, the Insurance Commission of The Bahamas’ superintendent, which gave the insurance industry just six days to provide feedback on a proposal which - if implemented - would require

both life and health and property and casualty underwriters to meet the “minimum” 50 percent threshold within two years.

Mrs Fields, in the May 19, 2023, letter to all “registered domestic insurers”, wrote: “The Government of The Bahamas is considering the imposition of a mandatory minimum holding of government securities by regulated insurance companies. We have been informed that the International Monetary Fund has

Ex-MP says: ‘Gov’t supporters trying to get hands on GBPA’

recommended this course of action to the Ministry of Finance.

“The Government is suggesting a minimum holding of 50 percent of its assets to be held in government securities. It would allow a transition period of 24 months for companies to attain this minimum threshold. The Commission has not determined how the minimum holding would be calculated.

“However, it is being considered that it be based on the statutory funds held in accordance with section 45 of the Insurance Act 2005. The Commission has conducted a benchmark in consideration of this proposal, and has found that one jurisdiction imposes this requirement in which the calculation is based upon minimum required capital/surplus.”

SEE PAGE B6

Corporate income tax is ‘wrong way around’

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

THE OPPOSITION’S

finance spokesman yes-

terday argued that The Bahamas has corporate income tax “the wrong way around” because the proposed reform options are forecast to suck “more money” from the private sector via taxation.

Kwasi Thompson, former minister of state for finance, also told the House of Assembly that the Opposition “cannot support increasing taxation” - as envisaged by all four corporate income tax options in the Government’s ‘green paper’ - without the Davis

administration producing a plan to eliminate “unnecessary spending”.

Speaking as the House debated legislation to amend the International Business Companies (IBCs) and Exempted Liability Partnership Acts, so as to

SEE

Gov’t digs in for 25% mining profits share

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

LEGISLATION that will create a new regulatory regime for mineral mining and exploration, and features a “minimum” 25 percent profit sharing with the Government, was tabled in the House of Assembly yesterday.

The Mining Bill 2023, which will create a Department of Mining to oversee the industry if passed into law as-is, stipulates that “all rights of ownership in, and control of, minerals” automatically vests in the Government regardless

of whether the land upon which they are discovered is privately owned.

The Bill, which appears to be an effort to provide greater regulation over The Bahamas’ natural resources, and to ensure a greater share of the proceeds go to the benefit of the Government and Bahamian taxpayers, bans mineral prospecting without possessing the proper approvals and licences and threatens fines of up to $150,000 and two-year prison terms for violators.

While no industries are specified in the Bill, it will likely apply to aragonite,

SEE

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

A FORMER MP yesterday doubled down on concerns that “supporters of the governing party have been trying to get their hands on the Grand Bahama Port Authority” amid push back to calls for politics to be kept out of Freeport’s future.

Frederick McAlpine, the ex-Pineridge MP and senator, declined to name the “supporters” he referenced in yesterday’s statement when contacted by Tribune Business. However, he added that “there’s a former person in the Port [Authority] also trying to get involved”.

Again, it was unclear who he was referring to as Mr McAlpine resolutely refused to give names. However, multiple sources have suggested that Hannes Babak, the former Grand Bahama Port Authority (GBPA) and Port Group Ltd chairman, who is known to be close to the Prime Minister, is playing a

key role behind the scenes as efforts to resolve the future of Freeport’s quasigovernmental authority and the wider city intensify. Mr McAlpine, in a statement to this newspaper responding to Fred Mitchell, minister of foreign affairs and the PLP’s chairman, renewed his opposition to the Government acquiring the GBPA - or partnering with a private company such as Mediterranean Shipping Company (MSC) to do so - for fear that the arrangement would be infected by politics.

FREDERICK MCALPINE

CLOSES $10.5M DEAL FOR COST RIGHT RELOCATION

AML Foods yesterday confirmed it will proceed with the relocation of its Cost Right brand after closing the $10.5m purchase of the property currently housing its Solomon’s SuperCentre format.

The BISX-listed food retail and franchise group, in a statement, said the building located on East West Highway and Old Trail Road will now be converted into two retail formats. Besides a 55,000 square foot Cost Right

outlet, which will enable the brand to relocate from its present Town Centre Mall site, the building will also house a 25,000 square foot Solomon’s neighbourhood grocery store.

With the completion of the acquisition, which was

financed by an RBC Royal Bank (Bahamas) credit facility, AML Foods can now execute the revamp it first revealed in September 2022. It is understood that the BISX-listed group has acquired the property from Solomon Brothers Ltd,

which is owned by Martin Solomon and his family Gavin Watchorn, AML Foods chief executive and president, said: “The purchase of the Solomon’s Super Centre building is the largest and most strategic investment we have made in many years. The acquisition allows us to remodel the entire building, and simultaneously convert the store to a smaller neighbourhood grocery format following the strategic plan for our company.

“We are now also able to relocate Cost Right Nassau to a bigger, more purposeful and convenient space, another goal we have been actively exploring for quite some time.” Cost Right’s Town Centre Mall lease is due to expire within the next year and several months.

Mr Watchorn said the Solomon’s SuperCentre conversion will complete the company’s plans for reinvesting in its current stores and, once finished, AML Foods will refocus on growth through new locations and markets.

AML Foods said the format for the new Solomon’s Old Trail store will be similar to the company’s Yamacraw location in eastern New Providence, plus the recently-opened downtown Freeport store. The planning phase for the project was running alongside with the building acquisition process, and the company expects to begin the tender process for construction in the coming months.

Through several phases, AML Foods said it expects to create two new modern stores while replacing the current equipment, lighting, fixtures and refrigeration systems. It expects that the new Cost Right location

will open first, followed by the Solomon’s store. Both locations will be powered using solar energy as part of a $1.7m investment in solar power that is due to begin shortly in several of the group’s stores.

Mr Watchorn said AML Foods will be able to determine a timeline for the project’s completion once the design and equipment sourcing are completed. He added: “It is important to us to provide the best grocery store standards, convenience and shopping experiences for all of our shoppers, so we will continue to invest in our businesses and drive efficiencies.

“For the duration of the renovations, we will work to minimise disruption for our customers, and we appreciate your patience as we remodel to better serve you.”

“RBC have been the bankers for AML for several decades, and we are delighted to have once again partnered with them for this significant investment,” said Brian Knowles, RBC’s vice-president for corporate banking. “This transaction underscores our commitment to providing innovative and tailored financing solutions that help our clients thrive and communities prosper. We extend our sincere appreciation to AML and its board for choosing RBC to be their financier and strategic advisor.”

Davette Lightbourne, AML Foods’ chief financial officer, said: “For our company, RBC remains a strong financial partner. Due to their wealth of experience, the entire funding process was well planned and efficient, and we appreciate the resources and consultation they provided.”

THE PRIME Minister yesterday said his “technical team” is working on a resolution to the petroleum dealers’ margin increase demands as many continued the halt to diesel sales for a third day.

Speaking briefly to Tribune Business during a break in the House of Assembly debate, Philip Davis KC said of the action taken by gas station operators: “They decided to do what

they wanted to do, and it’s their business that they are impacting. Hopefully they will understand what it is to conduct business in environments such as this.”

Meanwhile, Vasco Bastian, the Bahamas Petroleum Retailers Association’s (BPRA) vice-president, told Tribune Business he is hoping the halt to diesel sales will “not be much longer”. He added: “We haven’t had any discussions with the Prime Minister, but we await communications with him, however, and we hope his

office will reach out to us shortly.”

Not all petroleum dealers have halted diesel sales.

Multiple Shell service stations, which are owned and operated by the wholesale supplier, BISX-listed FOCOL Holdings, have continued to provide a vital lifeline to jitney drivers, taxi operators, truck drivers and industries such as construction - all of which rely heavily on diesel - by continuing to make the fuel available.

Mr Bastian addressed this “breaking of ranks” by the Shell branded stations,

saying: “The Shell situation is a very complicated one, and that is an opportunity for a discussion at another time.”

“I’m not sure if the public is aware of the model that Shell currently operates, and it is different from the model that other wholesalers in this country operate, so that needs to be addressed in a separate issue by the BPRA as well as the Government itself.”

With diesel prices up 12 percent for the year to endMarch, based on Bahamas

Legal reforms set to ban pyramid selling schemes

By YOURI KEMP Tribune Business Reporter ykemp@tribunemedia.net

THE PRIME Minister yesterday unveiled plans to strengthen protections for Bahamian consumers through legal reforms that will ban “pyramid selling schemes” and allow regulators to issue warning notices over “harmful business practices”.

Philip Davis KC, addressing the House of Assembly, said the Consumer Protection Bill 2023 will “enhance the rights of consumers across our country” by replacing existing legislation with a regulatory framework fit for the digital era in which an increasing number of transactions are conducted online.

“The Bill includes stringent provisions against misleading and deceptive conduct, harassment and coercion. We want to create a marketplace where consumers can engage with confidence and without fear,” he said. “A critical aspect of the Bill is the restriction of pyramid selling, and the obligation for businesses to state the full costs of goods or services. These measures will help ensure that consumers are not exploited or deceived.”

So-called pyramid schemes, whose founders and promoters often exploit them to perpetrate financial frauds in unsuspecting victims, rely on drawing in persons who, in turn, recruit an ever-increasing number of “investors” in return for the promise of receiving goods and services. The proposed Bill simply states: “No person shall promote or operate a pyramid selling scheme.”

Mr Davis yesterday argued that the Bill’s enhanced safeguards are critical to promoting a Bahamian economy founded on the principles of honesty and integrity, with increased trust between businesses and consumers. He added that its provisions will also foster fair commerce, and help create an environment of competition and innovation where all firms and entrepreneurs compete on a level playing field.

“This Bill is for all Bahamians - from the young mother budgeting for her family’s groceries to the retiree investing his hardearned money in a new home appliance. Our individual households, our communities, and our economy depend on the integrity and fairness of trade,” the Prime Minister asserted.

“In an era of digital transactions, global markets and rapidly evolving consumer needs and products, it’s time for us to strengthen our laws to adapt - and to better protect - the interests of Bahamian consumers.”

He also suggested that stronger consumer protections are critical to reducing poverty and enhancing economic development.

“Our economic growth depends upon a market which encourages healthy competition, drives innovation and ensures customer satisfaction. At the heart of this new Consumer Protection Bill is a commitment to restructuring and reorganising the existing provisions for better clarity and comprehension,” Mr Davis said.

“Our focus on transparency supports a market environment in which all players, big and small, can operate, grow and prosper in a manner that is regulated and fair..... The proposed legislation also empowers the Consumer Commission to issue advisory notices in situations where harmful practices to consumers are identified. We believe these notices will serve as a valuable tool in preventing harmful business practices and educating consumers about potential risks.”

PM: We might as well get 15% corporate tax revenue

By YOURI KEMP Tribune Business Reporter ykemp@tribunemedia.net

THE PRIME Minister yesterday extended the corporate income tax consultation period by almost two months to end-August 2023 as he reassured that the Government has not decided upon “any particular policy action”.

Philip Davis KC, addressing the House of Assembly on the Government’s ‘green paper’, said The Bahamas has “an incentive” to comply with the G-20 and Organisation for Economic Co-Operation and Development’s (OECD) minimum 15 percent global corporate tax as it would receive all revenues generated from applying this levy to local entities who are part of multinational groups earning 750m euros or more in annual turnover.

Failure to impose a 15 percent corporate income tax rate, he added, would merely result in The Bahamas losing tax revenue it could have gained as those multinational entities would then be subject to a “top-up” tax in their home country jurisdictions. Thus revenues which could have

been paid in, and earned by, The Bahamas would instead go to these home country jurisdictions.

“Those entities in The Bahamas meeting the threshold of 750m euros annually will be liable to pay a top-up tax to their head offices in jurisdictions where they are not paying this corporate income tax. Therefore, there is an incentive for The Bahamas to impose the 15 percent minimum corporate income tax.

“The second motivation for exploring a corporate income tax is to address the Government’s goal of securing greater fairness and equity within The Bahamas’ existing tax regime. Of significance here is the prevailing concern about the inherent bias in Business License fees, where firms still incur a significant tax burden even in loss-making years because calculations are based on turnover instead of profits.

“I want to emphasise here that if it is decided that a corporate income tax is to be levied on companies doing business in The Bahamas, those companies paying a corporate income tax would not also pay Business Licence fees.”

Turning to the corporate income tax consultation paper, which was drafted after studies by the Deloitte & Touche accounting firm, Mr Davis said: “It was also ably supported by a Business Advisory Committee comprised of economic sector representatives, and employed an assessment process that included interviews with key business leaders on potential options, risks and challenges.”

“While the green paper presents options on what a corporate income tax policy for The Bahamas might look like, it does not contain a commitment to any particular policy action. The ‘white paper’, which is to follow the ‘green paper’, will contain explicit policy statements on the Government’s intended approach to the corporate income tax strategy and its implementation, and will set out proposals for legislative changes and the introduction of new laws,as deemed necessary.

“As we move forward, rest assured that fairness and equity are non-negotiable. Any changes to our tax regime must - and will - benefit The Bahamas and our people.”

Under the new Bill, consumers will be able to make complaints against unfair business practices while outside The Bahamas. Mr Davis added: “In a world that is increasingly digital, we recognise the need to streamline processes and make it easier for consumers to give evidence. To this end, the Bill includes provisions to allow for virtual testimony, which will expedite investigations and support convenience for consumers. “A significant change under the new Bill is the mandatory licensing and

registration of providers. Failure to comply will result in penalties, encouraging businesses to operate within the boundaries of law and promoting a culture of accountability.

“As we continue to usher The Bahamas into the digital age, this Bill also enhances our ability to oversee distance selling and payment arrangements. With the growth of online commerce, it’s vital that we maintain robust checks and balances, ensuring that every transaction is fair and transparent,” Mr Davis continued.

“Additionally, the Bill expands on the powers of the minister to make necessary regulations to protect consumers effectively. This is crucial as it provides us with the flexibility to adapt and respond swiftly to emerging challenges and opportunities in the marketplace.

“The enactment of this Bill signals a significant shift in our approach to consumer protection. We are aiming for an inclusive economy where everyone has access to safe, quality goods and services at a fair price.”

THE ATTORNEY General yesterday said financial services providers will have to do economic substance reporting for all entities where they act as the registered agent if The Bahamas is to escape Europe’s ‘blacklist’ this year.

Ryan Pinder KC said the change aligns with The Bahamas’ reformed economic substance reporting portal and is the “only effective mechanism” to achieve a positive re-rating from the European Union (EU) when it comes to tax co-operation.

He said: “A second very material amendment is we now provide for an entity

to report to its registered agent and, where that entity has no registered agent, it must report the required information to the Registrar General. The registered agent will now be mandated to make filings on behalf of the entities it manages for economic substance.

“This is a change from the current regime where the entities themselves are the responsible parties for the reporting. We are making this change to have a more efficient reporting platform that accomplishes the requirements of the EU and the OECD.

“I might point out we are not chartering new territory in this regard. The BVI and Barbados themselves, and other jurisdictions, mandate registered agent reporting for economic substance. Now, it might not

be universal amongst all jurisdictions. But it is the approach that we’re taking in line with one, the way the reporting portal is going to be set up, but secondly, if we are to achieve a positive re-rating by the end of this year this is the only effective mechanism to be able to accomplish that.”

Mr Pinder warned registered agents that, with the impending changes, they will have to interact with clients more and suggested adding a schedule into the registered agent agreements going forward. He said: “The registered agents are going to have to report on behalf of their clients, which means you’re going to have to reach out to your clients. You may have to change your terms of engagement or at least look for a modification.

“Some registered agents I know have their services scheduled on to a registered agent agreement. So you may add a schedule. There’s going to be some client interaction that you’re going to have to do. That’s why I’m telling you now and not waiting. This is an expectation of a material change and how reporting is going to be done under economic substance reporting.”

Mr Pinder said the new Commercial Entities (Substance Requirements) Bill will provide more extensive definitions to aid the financial services industry in its implementation and reporting, adding that with the amendments The Bahamas should be removed from the EU’s non-cooperative list this year. He said: “The new Bill will provide for extensive definitions to better guide the industry with respect to implementation and reporting. These definitions provide further descriptions of what relevant activities are. Such as financing and leasing.

“It is the goal that a new Bill incorporating international standards, and incorporating a reformed reporting framework, along with a new and effective reporting portal, will allow us to be removed from the list of non-cooperating jurisdictions by the next review period, which is scheduled for this fall.”

“If all goes right by the end of this calendar year we will be re-rated as a co-operative jurisdiction and not be on any EU list. Shouldn’t have been there in the first place, but we’re

doing everything we can to ensure that we provide as compliant a framework as you can. It’s going to take some work with industry. It’s going to take some work with government. It’s going to take some work with the regulators, but I think we can do it.”

Speaking at the Bahamas Institute of Financial Services (BIFS) conference, Mr Pinder said the Bill will eliminate a classification for passive entries that is drawing scrutiny from the EU.

He said: “The Bill revises the definition of relevant activities. This is important by deleting the category of passive holding entity. And all such entities would now be included in the equity holding entity classification. So we’re deleting one of the classifications for passive entities.

“We were outliers with respect to the definition, or even a category of a passive holding entity. If you looked and benchmarked it, we were the only country that had such a designation,

which certainly brought the ire and focus of the EU on having that when nobody else did.

“You never want to be outliers in this space and have something that is contrary or not in line with global best practices. So this amendment is being considered and put forward to ensure that we are compliant with global best practices,” Mr Pinder added.

“We are having a transition provision for those people who have already reported in this calendar year that you will be deemed redefined as an equity holding entity, but for those who have not reported and are looking to report before the September deadline - I know most of the reporting is done in that period in any event - just be mindful that you will have a different reporting classification if you’re reporting from what otherwise would have been a passive holding entity.”

RYAN PINDER KC

EX-MP SAYS: ‘GOV’T SUPPORTERS TRYING TO GET HANDS ON GBPA’

While agreeing with Mr Mitchell that new ownership and vision at the GBPA is critical to Freeport’s future, he differed markedly on how to bring this about and the form it should take. “Do I believe there should be transformation or replacement of some of the shareholders? Yes,” the former MP asserted. “However, do I want the Government running the Port Authority? No.

“Do I want the Government hand-picking a company to buy the Grand Bahama Port Authority and then to have that company turn around and sell certain assets to political cronies of the governing party. To that, I say: ‘No’. Neither do I want a company whose only concern will be that of oceanic ports with no regards to the management of the city itself.”

Mr McAlpine continued: “Grand Bahama is in need of an economic infusion, but let us not kid ourselves or try to ignore the elephant in the room. There are persons who support the governing party who have been trying to get their hands on the Grand Bahama Port Authority for some time.

“This will only lead to victimisation and marginalistion of persons within the Grand Bahama community. That is the cess pool of politics to which was referred. The Government, or its cronies, will not run Freeport any better than it has run the western and eastern end of the island of Grand Bahama.”

The reference to a “political cess pool”, which was made in a Tribune Business article published on Monday this week, resulted in a voice note from Mr Mitchell rebuking Mr McAlpine. However, this term did not come from the latter but, rather, Freeport businessman Darren Cooper.

It is unclear whether Mr Mitchell was speaking in his

capacity as a Cabinet minister or PLP chairman, as he referenced both in yesterday’s voice note. However, he argued that political interventions - such as Sir Lynden Pindling’s ‘bend or break’ speech - had brought positive reforms to Freeport in the past by making the city “more equitable” for Bahamians and “changing the social order”.

Fast forwarding to the present, the Fox Hill MP, who is taking a keen interest in Freeport and the GBPA, said: “We have a problem today. Freeport and Grand Bahama are dying on the vine. It has been steadily downhill with the new owners of the city, or at least the heirs to the owners of the city, very much seeing it only as a play thing and not a place with real live people; a real live place where people live, breathe and have their own being.

“The owners of the city have sold-off assets, failed in their commitments to being fresh investment in, failed in their obligations to bring essential infrastructure and build the city.”

Arguing that only the Government can reverse this trend, Mr Mitchell added: “It points to only one direction to solve it. New investment must be found and only the Government can do so.

“There’s only one organisation that can do that, and they won’t play footsie with the owners of Freeport. Push has come to shove, and the PLP has been leading the way in causing change to come to this paradigm.” He added that “the first tentative steps” to revive Freeport, and find new ownership and investment for the GBPA, had been taken under the last Christie administration with the effort now picked up under the current Davisled government.

Noting that Maurice Moore, the former FNM MP, had previously signed on to a report

recommending that new investors/owners be found for the GBPA, Mr Mitchell added: “The owners of the Port are unable or apparently unwilling to meet the financial commitments which they have to the place and take it to the next stage. We all know that. It’s as clear as day.”

Circling back to Mr McAlpine, the PLP chairman asserted: “Why, when the PLP is calling for change, would a former MP and member of parliament, whether unintentionally or not, otherwise sully the political process by saying that Freeport and the changes the PLP proposes should not be caught in a cess pool of politics.

“Firstly, politics is not a cess pool. Secondly, it’s only politics, Mr MP McAlpine, that can find a solution to the problems of Freeport. You should join us, not fight us, but whether you come with the PLP in moving forward to fix the problems of Freeport and Grand Bahama, we are moving ahead.”

Mr McAlpine, for his part, while backing efforts by the Davis administration or any government to make economic progress in Freeport, whether involving change at the GBPA or not, said it must be profitable for both investors and the people of Grand Bahama.

“Grand Bahama doesn’t need political wrangling when it comes to this community or the Grand Bahama Port Authority. We need no more politics. We need vision,” he added. “I would be one of the first proponents, and have done so, to say that change is needed for the island of Grand Bahama, particularly the area that is run by the Grand Bahama Port Authority.

“Do we wish to see change in the Grand Bahama Port Authority; the way business is presently being dealt with? Yes. Do I believe it is lacklustre among the shareholders with regards to the transformation of Grand Bahama. Absolutely yes.”

The Government has been examining whether change at the GBPA is best achieved through either a private buyer acquiring the Hayward and St George families’ ownership interests, the Government doing itself or the regulatory and quasi-governmental powers being devolved back to Nassau.

The Prime Minister, in a prepared statement earlier this year, said: “Grand Bahama over the many years has failed to live up to its true promise and potential. And we are are in discussions with the Port Authority for the purposes of identifying a path

towards putting Grand Bahama on the right track to enable it to fulfill its full potential and promise.”

The GBPA owners, in a 2016 Memorandum of Understanding (MoU) signed with the Christie administration, committed to masterplan the development of their landholdings and seek a buyer for their interests within specified timelines. However, none of these conditions appear to have been fulfilled.

The GBPA, while described by some as a ‘regulatory shell’, still possesses considerable powers that include business licensing, building code and environmental enforcement, city management, and the power to levy fees and service charges together with the operation of a free trade zone that offers multiple forms of tax relief to investors.

However, its incomeearning assets have been

transferred to Port Group Ltd. These include the 50 percent equity stakes in Grand Bahama Development Company (DevCO) and the Freeport Harbour Company, likely to be the two families’ most valuable assets, together with interests in multiple other companies such as Freeport Commercial & Industrial, another major landowner. Should the Government seek to take over the GBPA’s regulatory powers, one source said it would amount to an “abrogation” of the Hawksbill Creek Agreement and raise multiple legal issues that would have to be addressed. Among these, they added, would be the provision that requires four-fifths (80 percent) of licensees to approve the devolution of quasi-governmental authority to a local government-type entity.

Insurer uproar on

FROM PAGE B1

Acknowledging the consequences for Insurance Commission licensees, and their ability to match assets with liabilities, Mrs Fields said the regulator wanted feedback on the implications for liquidity; credit risk; yield; duration; risk concentration and what was described as “ other unintended consequences”.

“We request feedback on an urgent basis and apologise for the time constraint,” she added. “However, this matter might be included in the Budget presentation at the end of May. In this regard we should be grateful if you would provide the Commission with your comments by May 25, 2023.” That deadline is today, with the Budget due to be unveiled next Wednesday.

Neither Simon Wilson, the Ministry of Finance’s financial secretary, nor Michael Halkitis, minister of economic affairs, responded to messages or could be contacted for comment before press time last night, so the rationale, intent and details behind the move could not be ascertained. Mrs Fields was said to be in a Zoom meeting when Tribune Business called and, despite leaving contact details and information on the nature of the call, it was not returned.

In the absence of explanation, speculation was rife yesterday that the Government has been forced to take such action because there is insufficient demand for its domestic Bahamian dollar debt securities. “Your guess is as good as mine,” Anton Saunders, Royal Star Assurance’s managing director, told Tribune Business.

“I have a feeling that the banks are over-leveraged with government securities, and I know all of them - because the country has been downgraded several times - had to take

provisions against their holdings of government securities. They’re not able to invest more in government stocks so they’re looking at other industries to invest.”

One source familiar with how the Government funds its operations told this newspaper they were “amazed” by the contents of Mrs Fields’ letter as it suggested it was struggling to raise net new financing in the domestic market.

Increasing the proportion of Bahamian dollar funding, and reducing reliance on foreign currency debt, has been a key objective for the Davis administration.

“I can’t imagine what set of circumstances would make the Government take this extraordinary step,” the source said. “You’re telling private entities they must take on government debt, and all have prudential limits and risk management standards. This seems draconian and extreme.

“The only plausible explanation is nobody is taking up the paper. They don’t have sufficient takeup of the paper; that people are not taking up the debt in sufficient quantum. It distorts your private market for debt by forcing businesses to take on the paper. It’s very, very strange. This seems like the kind of thing you do when you run out of options. You come out with a very socialist, totalitarian option like China does.”

They suggested that the Government should “move the market”, if there is insufficient appetite for its debt securities, by increasing the interest coupon such that investors receive increased returns to compensate for the perceived extra risk they are taking.

Julian Rolle, the BIA’s chairman, in a brief interview with Tribune Business said he was baffled by the minimum 50 percent investment threshold proposal. ‘It’s going to lead to losses, and also lead to

downgrades of companies that are rated internationally,” he added of carriers rated by A. M. Best. “The industry has indicated its grave concerns as to why this would have been done and the timing etc.”

As to the impact for insurance customers, namely Bahamian businesses and consumers, he added: “That has yet to be determined. Unfortunately, we cannot say what the impact will be. They haven’t provided us with what level of assets they are talking about.”

Insurance industry sources, speaking on condition of anonymity, yesterday said individual underwriters and the sector at large “need clarity” on whether the 50 percent applies to total assets, investment assets or statutory reserves. One contact suggested there would be “minimal” impact if it applied to the latter, as the statutory reserves for life and health underwriters and their property and casualty counterparts are $2m and $1m, respectively. The BIA, though, thought otherwise. In its May 24, 2023, letter, which was obtained by Tribune Business, the Association blasted: “The industry has grave concerns with a requirement for a minimum investment holding of government securities for a number of reasons. The industry would like to clearly state that it is opposed to having its investment appetite and strategy dictated to it by the Government.

“The industry would be aided by additional information and context surrounding the IMF’s recommendation for which this consideration has been based. The BIA asks that you share the IMF’s recommendation and its rationale with us. Additionally, we require clarification as to whether or not the reference to ‘50 percent of

Gov’ts 50% investment ‘dictate’

assets’ was in fact intended, or if the intention was, to refer to ‘investment assets’. If the latter was intended, please provide a definition of the same.”

Pointing to the short sixday consultation period, the BIA added: “This is of great concern as it does not allow the industry to fully consider the implications of the proposal, nor for the Government to consider the industry’s position. The BIA believes that effective consultation is a critical element in good governance, and is concerned that in both this and the previous national Budget, the Government has sought to introduce significant policy changes affecting the insurance industry without the benefit of adequate consultation.

“The insurance industry is a vital part of the Bahamian economy, and its ability to generate sustainable returns for the payment of claims is critical to the survival of the industry. Our businesses provide protection of lives and property across The Bahamas. Major changes that affect the industry should not be introduced without due care.”

Asserting that the “mandatory minimum 50 percent” threshold would go against all established principles of portfolio diversification and risk management if

implemented, the BIA argued that the Government “should not mandate the investment appetite of a private industry”. And it added that forcing a significant concentration of risk is also contrary to the Insurance Commission’s mandate to maintain a stable industry. “The structural concentration risk that is associated with a mandatory minimum threshold being established is a significant concern,” the BIA warned. “Insurers have to properly match assets with liabilities. From an actuarial standpoint this also increases liability. Increasing liability while decreasing returns due to a mandatory government securities requirement will quickly lead to negative income and eventually to failure of our businesses.”

These problems, it added, would worsen for Bahamian property and casualty insurers during multi-million dollar hurricane claims payouts. “The Government’s ability to collect taxes and fund its obligations may be negatively impacted by a catastrophic event, so this will inevitably put pressure on the carrying value of any Government securities,” the BIA warned.

“Having to deal with underwriting losses and investment losses simultaneously will negatively impact solvency and balance sheet strength at the

most inconvenient time. Individual companies should have the freedom to invest in Government securities based on their own risk profile and risk appetite.”

And, given what it described as the present “illiquidity” of domestic government debt, the BIA said the insurance industry would struggle to convert these securities into cash should a hurricane or another pandemic strike.

“If there is a significant catastrophe or another health pandemic, liquidity will be required quickly. Forced sales of Government registered stock may lead to loss in value, and harm the insured public,” the Association added.

Noting that two Bahamian life insurers have previously been downgraded by A. M Best, the industry’s rating agency, because of their government securities holdings, the BIA said forcing the industry to increase these would make carriers more vulnerable to negative rating actions that impact the cost and availability of reinsurance.

“Asset/liability matching is a key focus of insurers, and yield and duration is a vital part of that mixture. Mandatory levels of Government securities, which have mostly fixed rates of return, limit profit potential and increase reserve

liabilities at the same time. This mix of results over time will lead to the collapse of the industry,” the Association’s letter continued.

“[A] mandatory level of government securities for the insurance industry will lead to a false market. It also lends itself to rate fixing by the issuer, with the creation of a pricing monopoly. Rate fixing should be the opposite intent of the Government and the regulators of a private industry.

“The forces of supply and demand, and the issuer’s ability to set and reduce rates in the absence of true market forces, will also have a knock-on effect on the public overall. National Insurance Board assets would decrease as they are

a large holder of government securities, [and] a similar effect would be felt by pension plan funds and, by extension, the members of the same.”

The BIA said that, if implemented, the two-year transition will force insurers into a ‘fire sale’ of assets to comply. “This will reduce sales prices of those assets, impacting not only the profitability of the industry but also the ability of the industry to buy Government securities. Competitive disadvantage issues will arise as international insurers operating in The Bahamas market would not be subject to the same requirements,” it added.

Kwasi Thompson, the Opposition’s finance spokesman, yesterday

demanded an explanation from the Government as to why it is seeking to impose this mandatory threshold on insurance industry investments. The Prime Minister, who is also minister of finance, was present in the House of Assembly when he made those remarks but - like the rest of the Government - provided no explanation or response.

National Statistical Institute (BNSI) data, gas station operators are incurring significant overdraft and credit card fees to purchase diesel supplies at the front end but earning only “a few pennies” in return.

Diesel margins are 34 cents per gallon, compared to 54 cents on gasoline, and many gas station operators have halted sales of the former fuel in a bid to both cut costs and try and force a decision from the Government over increasing their price-controlled fixed margins - an issue the two sides have been locked in negotiations over for more than a year.

The last margin increase enjoyed by gas station operators occurred in 2011, some 12 years ago under the last Ingraham administration. That took gasoline margins from 44 cents per gallon to 54 cents, where it has remained ever since, while diesel stands at 34 cents per gallon. However,

‘IMPACTING THEMSELVES’ WITH DIESEL HALT

operating costs and inflationary pressures have increased substantially then, especially amid the post-COVID cost of living crisis.

As a result, dealers are arguing that the present price-controlled fixed margins are insufficient to enable them to cover their operating costs and break even, let alone make a profit. Besides facing an up to 163 percent increase in Bahamas Power & Light (BPL) fuel charges amid peak summer consumption, station operators also have to pay rent, franchise and other fees to their wholesale landlords, as well as contend with a 15 percent increase in insurance costs.

Raymond Jones, the Bahamas Petroleum Retailers Association’s (BPRA) president, told this newspaper earlier this week that, with many gas station employees paid at minimum wage, the 24 percent or $50 per week increase implemented from New

Year’s Day has had to be covered by operators without any increase in their margins. And the increased wage bill has also led to a matching increase in National Insurance Board (NIB) contributions. These combined cost increases, together with the absence of any margin increase, has pushed many retailers to breaking point with some in a position where it would be “cheaper to close” than continue operating. As a result, Mr Jones said the Association and its members had been left with little choice but to act accordingly.

“We’re very mindful of the consumers we serve. We don’t want to disenfranchise them in any sort of way,” Mr Jones told Tribune Business. “But we’re not running a charity. We’re not social services. Because we’re price controlled by the Government we need them to... make the adjustment” to the fixed margins.

Noting that BPL and virtually all other businesses and industries have been able to adjust prices to cope with rising costs, but not the petroleum sector, he added of the diesel halt: “We’ll take this as what we consider a measured action and, at some point, if we don’t have the ability to sit down and come to a conclusion, we will have to increase the effect of what we do.

“This will go on until such time as we have a meeting of the minds, and come to a conclusion. I don’t think we need to be negotiating any more. We’ve exchanged ideas and proposals. We were right at the door [of an agreement], but we need to sign it, put it in writing and sign off on it, discuss the implementation and let’s go.

“It’s just a question of the Government sitting down and saying: ‘Right, here’s what we propose and here’s how we do it. Here’s the implementation plan’. We

say: ‘Thank you very much. You’ve been very generous. Let’s go. Let’s get back to work and let the public drive’. There’s a holiday weekend coming up and we want people to be driving, but we need to get some semblance of an agreement as opposed to continuing the dialogue,” Mr Jones continued.

“In no way are we trying to threaten the public or the Government or anyone else. Many of the staff employed by gas stations got that 24 percent minimum wage increase. We’re saying: ‘Please give us a chance to offset this so we

can sleep at night, pay our bills, pay VAT, pay national insurance.

“The petroleum retailers are resolute. We will stay this course as we need to come to an agreement, come to a conclusion, let us get back to work and keep everyone employed. There is no intent to disenfranchise the motoring public, our customers, because we depend on them, but we have to conclude this so we can move on. We’re losing money by not selling diesel, giving up some revenue again, although it’s only pennies.”

Share your news

The Tribune wants to hear from people who are making news in their neighbourhoods. Perhaps you are raising funds for a good cause, campaigning for improvements in the area or have won an award. If so, call us on 322-1986 and share your story.

Corporate income tax is ‘wrong way around’

improve The Bahamas’ financial services competitiveness, he asserted that it is “very concerning” that all four reform options are projected to cut economic growth, domestic and foreign direct investment, and result in increased unemployment.

Noting that increased taxation is not a recipe for sparking economic expansion, Mr Thompson argued: “I would suggest isn’t this the wrong way around?

Don’t we want more funds in the hands of the private sector, and let the private sector hire more people and grow the economy as opposed to taking more money out of the private sector into the Government and relying on the Government to put it back into infrastructure?

“I would suggest we are looking at it the wrong way. We should be looking at ways for the Government to keep their funds, and by keeping their funds they can invest them in increased employment and grow the economy and grow revenue.”

Mr Thompson said he agreed with the Prime Minister that The Bahamas should impose the 15 percent minimum global corporate tax, as demanded by the G-20 and OECD, on local corporate entities that are part of multinational groups with turnover in excess of 750m euros per annum. For if it did not, a potential source of tax revenue would be lost to head office jurisdictions that would implement a “top-up” tax there as a consequence.

Acknowledging that the former Minnis administration agreed that The Bahamas would comply with the G-20/OECD drive by signing on in July 2021, Mr Thompson said: “We consulted before we did this, and it was widely accepted by [the financial services] industry that it didn’t make sense not to do it. The very point the Prime Minister made: If we don’t collect it, we lose it. If we don’t collect it, it’s collected in the multinational’s home country.

“It only makes sense that we put in the infrastructure to collect this minimum corporate tax. There are not very many Bahamian companies that fall into this category, and that’s allowed us to make that determination. There are not very many Bahamian companies this will affect.

“I recall that after consultation, the industry said we cannot avoid doing it, the industry is moving in this direction, and if we want to be at the top of our game in financial services we have to sign up for this.” However, Mr Thompson said the G-20/OECD initiative has given The Bahamas a chance to “go further.... and look at the entire tax system” including the possible replacement of Business Licence fees with a corporate income tax.

However, Mr Thompson said he and the Free National Movement (FNM) are opposed to any increase in taxation unless the Government demonstrates a plan to bring its spending under control. “The Government is not able to control spending,” he argued. “We have record-breaking

revenues but have not seen a corresponding decline in the deficit.

“As a fundamental point, we cannot support an increase in taxation without a plan to reduce unnecessary spending.” The east Grand Bahama MP said the debate is now about whether corporate income tax should replace the Business Licence fee and be imposed on much, if not all, the domestic Bahamian economy as well as those entities caught by the G-20/OECD initiative.

Describing the Government’s ‘green paper’ as “a little incomplete” when it came to providing the necessary information, Mr Thompson argued that it should have gone beyond the stated four “objectives” to include a fifth and sixth goal. “When looking at taxation on one side, you have to be looking at how to grow the economy. That is the ease of doing business on the other side,” he said.

Suggesting that the ‘green paper’ was “missing the bigger picture” and that, as a result, The Bahamas is “going to miss out” - especially since the Government conceded that introducing corporate taxation will “increase the cost of doing business” domestically with all the filing, reporting, auditing and compliance requirements.

“The ‘green paper’ seems to be a bit uncertain how this affects the area of Freeport,” Mr Thompson added. “Freeport is supposed to be a tax free zone, and we pay business licence to the Grand Bahama Port Authority.” Suggesting that paying corporate income tax as well as GBPA licence fees would be untenable, he said: “I believe corporate income tax ought not be in Freeport because we’re already paying business licence to the Port Authority.”

The Government’s ‘green paper’, which is dated May 17, 2023, sets out the first option as merely introducing a 15 percent corporate income tax for all Bahamasbased entities that fall into that 750m-plus turnover category. While that would have zero impact on the country’s economic growth and unemployment rate, the paper estimates it would cause foreign direct investment (FDI) and domestic investment to contract by 0.3 percent and 0.1 percent, respectively.

The second and third options, described as “more nuanced” because of the better balance they strike between tax revenue and economic impact, are those the Government indicates it is giving more serious consideration to. The second, labelled as “a soft introduction”, would introduce the same 15 percent rate for all those caught in the G-20/ OECD net and also levy a 10 percent corporate income tax on all other businesses “to maintain regional tax competitiveness”.

This option, the ‘green paper’ adds, would have minor negative impacts on GDP, foreign and domestic investment, and unemployment. The latter would rise by 0.1 percent, while GDP growth would contract by 0.3 percent and foreign and domestic investment fall by 1.5 percent and 0.3 percent, respectively.

PUBLIC NOTICE

INTENT TO CHANGE NAME BY DEED POLL

The Public is hereby advised that I, NATHALIE CURRY of P.O Box N9805 John Road, New Providence, Bahamas, Parent of PEYTON DWAYNE CURRY A minor intend to change my child’s name to PEYTON DWAYNE PRATT If there are any objections to this change of name by Deed Poll, you may write such objections to the Deputy Chief Passport Officer, P.O. Box N-742, Nassau, Bahamas no later than thirty (30) days after the date of publication of this notice.

NOTICE is hereby given that SAMMY GIBSON DORCELY, Sunrise Road, New Providence, The Bahamas applying to the Minister responsible for Nationality and Citizenship, for Registration Naturalization as a citizen of The Bahamas, and that any person who knows any reason why registration/naturalization should not be granted, should send a written and signed statement of the facts within twenty-eight days from the 25th day of May 2023 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, New Providence, The Bahamas.

The third option, branded as “simplicity driven”, would exempt or carve-out small businesses earning less than a $500,000 annual turnover to leave them still paying the existing Business Licence fee. Bahamas-based entities in groups that meet the G-20/OECD threshold would pay a 15 percent corporate income tax, and all other companies generating

more than $500,000 would pay a 12 percent rate.

The third option, though, would result in greater negative economic impacts although generating more revenue for the Government. Under this scenario, the ‘green paper’ said GDP growth was estimated to contract by 0.9 percent with unemployment increasing by 0.5 percent. Foreign and domestic investment will

fall by sums equivalent to 5.1 percent and 1 percent, respectively. The final option, which will generate the greatest revenue increase for the Government but also inflict the harshest economic impact, is to simply impose the 15 percent corporate income tax rate on all businesses with a turnover greater than $500,000 per annum and a 10 percent

on small and medium-sized enterprises earning less than that. This would result in an economic contraction of 1.7 percent, or around $200m, the ‘green paper’ projected, with the unemployment rate rising by 0.9 percent. FDI would fall by 10.2 percent, and its domestic investment counterpart by 2 percent. However, government revenues under this scenario are forecast to rise by 96 percent compared to the $140m collected from Business Licence fees in 2019

Gov’t digs in for 25% mining profits share

FROM PAGE B1

limestone and sand mining activities, and possibly even Morton Salt’s salt harvesting activities in Inagua. It remains to be seen how holders of existing licences will be treated, and if they will be grandfathered in under the new legislation.

“This Bill seeks to establish a legal, fiscal and regulatory framework for a mining industry, and provides for the creation of a Department of Mining as the regulatory authority,” the Bill’s “objects and reasons” section states. “Sections eight to 11m of the Bill establish that all

rights of ownership and control of minerals in The Bahamas are vested in the Government, and expressly prohibits prospecting and mining operations... without required approvals.”

Besides the “statutory fees, levies and other payment obligations” that mining licence holders will face, but which are not specified in the Bill, they will also “be subject to profit sharing arrangements under which the Government shall be entitled to a minimum of a 25 percent of the profits of the mining operations”.

The Public Treasury’s gains do not stop there.

“A holder of a mining licence may be subject to state participation arrangements under the terms of an agreement entered into pursuant to section 15, under which the Government shall be entitled to acquire a minimum 10 percent equity interest in the holder of a mineral right,” the Bill adds. “The minister shall make regulations to provide for state participation in mining operations.” Royalties, meanwhile, will be calculated at a rate based on “the gross sale value of minerals produced from mining operations”. While these royalty payments can be deferred, mineral mining licence holders also face having to pay a surface rental fee to the Government.

“Section 15 provides for the ability of the minister to enter into an agreement governing the grant of a mining licence which sets out any conditions relative to the mining right, the implementation of any profit sharing and state participation arrangements between the Government and the holder of a mineral right and any further fiscal impositions which are agreed,” the Bill states.

However, the legislation also gives power to the Cabinet to compulsorily acquire private land “or rights over private land” so that it can be used by a licence holder for their operations. Compensation to the impacted party is to be paid by the mining firm in what appears to be an extension of the laws involving the “compulsory acquisition of land for a public purpose”.

NOTICE is hereby given that GIBSON JOSEPH of #93 Podoleo Street off Robinson Road, New Providence, Bahamas, is applying to the Minister responsible for Nationality and Citizenship, for registration/naturalization as a citizen of The Bahamas, and that any person who knows any reason why registration/naturalization should not be granted, should send a written and signed statement of the facts within twenty-eight days from the 25th day of May, 2023 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, Bahamas.

NOTICE is hereby given that JOHNNY PETERSON, Sommerville Drive Freeport, Grand Bahama applying to the Minister responsible for Nationality and Citizenship, for Registration Naturalization as a citizen of The Bahamas, and that any person who knows any reason why registration/naturalization should not be granted, should send a written and signed statement of the facts within twenty-eight days from the 25th day of May 2023 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, New Providence, The Bahamas.

EVERETTE BRAYNEN & LINDA BRAYNEN

PLEASE CONTACT THE OFFICE OF MITRE COURT AT THE ADDRESS AND CONTACTS PROVIDED BELOW

MITRE COURT Chambers Suite 227, 2nd Floor, Island Lane Building

Olde Towne, Sandyport West Bay Street

Nassau, The Bahamas

Telephone: 327-4150

Email: info@mitrecourtlaw.com