10052018 BUSINESS

business@tribunemedia.net

FRIDAY, OCTOBER 5, 2018

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Lucayan chair slams ‘nasty, torturous’ close * Accuses Hutchison Whampoa of ‘a lot of bad faith’ * Final deal terms settled, await Cabinet approval * Chamber chief: Govt deal was ‘a needs must’

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

T

HE Grand Lucayan’s chairman yesterday accused Hutchison Whampoa of displaying “a lot of bad faith” over the $65m deal’s closing, branding negotiations as “nasty and torturous”.

Michael Scott, chairman of Lucayan Renewal Holdings, the Governmentowned special purpose vehicle (SPV) that controls

THE GRAND LUCAYAN the resort, told Tribune Business he was now awaiting Cabinet approval after finally settling the closing terms and costs with

the Hong Kong-based conglomerate.

“We have finally agreed the accounts with them after a long, arduous, nasty

Marinas enjoy up to 40% rise in boat traffic

By NATARIO MCKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

MICHAEL SCOTT

and torturous process,” he said. “I’m waiting for the Deputy Prime Minister to get formal Cabinet approval for it, and then the deal is done. It’s been nasty, and there’s been a lot of bad faith on the part of Hutchison Whampoa.”

Tribune Business understands that approval of the Grand Lucayan purchase completion will likely be sought, and discussed at next Tuesday’s full Cabinet meeting. The $300,000 monthly lease payments that the Government was

making to Hutchison under the terms of a guarantee figured prominently among the many contentious issues the two sides fought over in the closing talks.

This newspaper was informed that Lucayan Renewal Holdings sought to resist the Hong Kong conglomerate’s demands that the Government pay the final monthly installments it claimed were due under this agreement,

SEE PAGE 4

Govt VAT clarity to unleash $1bn of development

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net MORE than $1bn in real estate projects may have been unleashed, and “a serious challenge to home ownership” removed, after the Government clarified that the sector can reclaim VAT “inputs”.

Developers yesterday told Tribune Business they had been given “a tremendous amount of confidence to take the leap” on new and existing projects due to the outcome of a meeting with KP Turnquest, deputy prime minister, and senior ministry of finance officials last week.

The meeting, with the newly-formed Bahamas Developers Association and related professionals, addressed the industry’s

* Developers able to reclaim VAT inputs * Major ‘home ownership challenge’ ended * $100m Palm Cay expansion’s ‘hold’ over

JASON KINSALE

FRANON WILSON

MARLON JOHNSON

long-standing concern that the 2018-2019 budget’s tax policy changes made it impossible for real estate projects to recover valueadded tax (VAT) paid on their input (construction/

development) costs.

This was based on the Government’s decision to revert back to the old ten percent stamp duty structure for real estate transactions, and abandon

the previous stamp duty/ VAT split, which developers interpreted as making real estate sales “VAT exempt”.

As a result, they feared this would leave them

Bahamians pay price of ‘double BPL whammy’

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net BAHAMIAN businesses and households are paying the price of “a double whammy” caused by the recent fires at Bahamas Power & Light’s (BPL) Clifton Pier plant, it was revealed yesterday.

Whitney Heastie, the state-owned utility’s chief executive, told Tribune Business that the blazes had further hiked electricity bills by depriving BPL of its two most efficient generation units.

These engines, which typically generate 25 percent of

WHITNEY HEASTIE New Providence’s energy supply, not only use lowercost heavy fuel oil (HFO) but also generate more energy per oil barrel than any others in BPL’s fleet.

With the energy monopoly now having to rely more on

SEE PAGE 6

Landfill contract is ‘blueprint for future’

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE contract for the New Providence landfill’s management will establish “a blueprint for the future” that can be applied throughout The Bahamas, a Cabinet minister has revealed.

Romauld Ferreira, pictured, minister of the environment and housing, told Tribune Business that talks between the Government and the Providence Advisors/Waste Resources

Development Group (WRDG) to finalise the management contract would establish a model for other landfill and solid waste management operations throughout The Bahamas.

Both Mr Ferreira and

SEE PAGE 6

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unable to “net off” or offset the VAT paid on construction materials - and the likes of contractor, engineer and architect bills - against the “output” tax whenever a property is sold.

Besides increasing real estate costs for both Bahamian and international buyers, and potentially putting home ownership beyond the reach of many Bahamians, developers were also concerned that the greater tax burden would push them into loss and render projects - especially those already underway - commercially non-viable.

But the Association, in a statement issued yesterday, said Mr Turnquest and Marlon Johnson, acting financial secretary, told

SEE PAGE 5

BAHAMIAN marina operators have seen as much as a 40 percent increase in business year-over year, their Association’s executive director said yesterday.

Basil Smith, speaking for the Association of Bahamas Marinas (ABM), told Tribune Business: “Things are going very well. Some of the marinas continue to report double digits. Things are looking very good for the marinas. The weather has been very forgiving so far this year. Our luck is still holding.

“Speaking to some of the marina operators, one of them quoted 24 percent just recentl,y and another said he was up by 40 percent over the previous year.”

Mr Smith said the ABM was looking forward to the Fort Lauderdale Boat Show at month’s end. “We have been meeting some time with the ministry of tourism to revive the level of support that the ministry once gave to the boating sector in terms of promotion,” he added.

“Our dreams are beginning to come through because the Fort Lauderdale Boat Show is coming up, and the ministry has agreed to work with us to develop a Bahamas pavilion at the boat show.”

Mr Smith continued: “It’s in a very good location that is certain to stop traffic. We are very happy with that and just need for them follow through with that for other boat shows. We hope to sit with the ministry soon and identify the key shows we would like to treat in that way.”

PAGE 2, Friday, October 5, 2018

American Airlines grows ChicagoNassau route

AMERICAN Airlines will offer year-round service between Chicago and Nassau starting from summer 2019, expanding the route from a seasonal winter service.

The move strengthens the carrier’s commitment to The Bahamas, and rounds out its current roster of flights to this destination from Charlotte, Miami, Philadelphia, Washington DC and Dallas/ Fort Worth.

“American has a long and proud history in The Bahamas, and we look forward to continuing to strengthen our footprint next summer as our Nassau-Chicago service begins to operate year-round,” said Alfredo Gonzalez, the carrier’s managing director for the Caribbean.

“This new route will provide our customers flying to and from The Bahamas with year-round access to this important destination and connecting hub in the United States, where we currently operate more than 480 daily flights to more than 130 destinations around the world.”

The move comes as the Nassau Airport Development Company (NAD) celebrates a banner year for 2018 to-date, having just posted record-breaking summer travel.

“We continue to be delighted with our 31-year partnership with American Airlines, a carrier which offers more than 130 weekly flights to six destinations in the country,” said Jan Knowles, NAD’s vicepresident of marketing and commercial development.

“American Airlines provides a robust schedule of flights between The Bahamas and the United States, helping to drive air travel growth.”

More than 3.5 million passengers passed through Lynden Pindling International Airport (LPIA) during NAD’s 2018 financial year, with the airport serving 55 destinations via 24 airlines.

THE TRIBUNE

THE ECONOMIC BENEFIT FROM BEING AUTHENTIC

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VERY weekend, the Ministry of Tourism’s Authentically Bahamian Marketplace features hand-made Bahamian craft and souvenir products. Visitors and locals alike have an opportunity to experience indigenous food, craft, music and other aspects of Bahamian culture. This experience is essentially designed by the Ministry of Tourism to serve as a catalyst for other businesses to produce and sell authentic Bahamian products and services.

For some, the concept of authenticity involves having a close relationship with the consumer and customising the goods and services to suit their specific demands. Burger King touts being authentic with the slogan: “Have it your way”. What they are saying to consumers is that while being true to yourself and your brand defines an aspect of authenticity, it also involves the extent to which you incorporate the thoughts, feelings and opinions of others being impacted by your goods and services.

Authentic products that showcase the creativity of Bahamian handicrafts provide tremendous benefits to buyers and, by extension, the economy at large. Here are a few of the benefits:

1. Handcrafted products are usually green Work done by hand takes less energy than a mass production assembly line, which makes it more environmentally sustainable. This is particularly true if the good is produced overseas and needs to be shipped a long distance to reach the consumer.

IAN FERGUSON BY

2. Handcrafted products are good for the job market Authentically-designed handicraft providers are responsible for creating jobs. Whether they are small or medium-sized enterprises, larger manufacturing companies or single-man entrepreneurs, when businesses that produce local craft get a piece of the market, the economy smiles.

3. Handcrafted products are worth more A number of experiments have shown that people value an object more highly when they are led to believe it contains an “air of authenticity” - for example, if they were told it was a work of art. This means that artisan products, be they jewellery or jam, are perceived to have more value in society. This is why assembly-line fast food sells at $7, and cook-to-order

restaurants charge on average $40 per main course entree.

4. Handcrafted products are also just better It is not just an amorphous air of authenticity that causes people to shell out more for handcrafted products.

Handcrafted goods are often just better.

Shoes, clothes, food and most other consumer items made by hand are usually of better quality than those made by machines.

7. Handcrafted products can meet your needs better You often have the option of customising your purchase with handmade goods. Because you are often dealing directly with the artisans when you purchase handcrafted products, they might be open to tweaking certain features specifically to fit your needs.

8. Handcrafted products are unique

6. Handcrafted products help communities

One of the most prevalent, although least quantifiable, reasons people report for choosing to purchase authentically handcrafted goods is that they just like having something that did not come from a big company. The nature of handmade goods means there are fewer of them, so whatever you are wearing, eating or adding to your home is as unique as you are.

It goes to reason that local companies producing authentic products return a higher percentage of their revenue to their communities. That means the people who make money off sales at independent businesses, their owners and employees, are more likely to spend their earnings at places in the same area where they work.

• NB: Ian R Ferguson is a talent management and organisational development consultant, having completed graduate studies with regional and international universities.

He has served organsations, both locally and globally, providing relevant solutions to their business growth and development issues. He may be contacted at iferguson@ bahamas.com.

5. Handcrafted products make you feel good about your purchases Supporting local artisans and their eco-conscious business practices certainly makes the average nationalist feel as if they have done their part in strengthening the economy.

Web shops partner to fight gaming addiction BAHAMIAN web shops have teamed with the Sandilands Rehabilitation Centre and Public Hospitals Authority (PHA) to host a free all-day gambling addiction seminar at month’s end.

The symposium is scheduled for the Church of God of Prophecy, Joe Farrington Road, on Wednesday, October 31, starting at 8.30am.

It aims to educate and create awareness about the need to game responsibly, and will provide information to the Bahamian public on the kinds of assistance

available to help those “at-risk” patrons who may abuse this entertainment.

The symposium will also highlight the partnerships that the Bahamas Gaming Operators Association (BGOA) has forged with professional organisations and individuals who are qualified to speak on - and provide solutions to - gambling addiction.

The Association forged its partnership with the Sandilands Rehabilitation Centre in May this year, in a bid to increase capacity

building and facilitate the up-skilling of professionals trained in the area of addiction. This aims to make them internationally certified, especially in the area of gambling addiction treatment, rehabilitation and recovery.

Since establishing this partnership, the Association has provided $30,000 in sponsorship for five professionals from Sandilands to receive this specialised training and qualifications via courses in the US. Those persons are expected to

complete their training this December.

The BGOA added that it has implemented a responsible gaming policy, with programmes now standardised across all operator members. “The BGOA recognised that in a highly regulated environment, and in keeping with international best practices, it was obliged to ensure a safety net was in place to help those patrons who may need assistance and/or would require professional intervention to treat their

disorder and at no cost to them,” the Association said.

“The global standards of responsible gaming policies and programmes in the US and the UK formed some of the foundational pillars for The Bahamas’ domestic gaming industry’s own responsible gaming initiatives. The industry believes in the protection of its patrons by ensuring they are aware and educated on all aspects of how to enjoy gaming both responsibly and in moderation.”

THE TRIBUNE

Friday, October 5, 2018, PAGE 3

BAHAMASAIR CHIEF: TAXES EXCEED TICKETS REVENUE

By NATARIO MCKENZIE

Tracy Cooper, pictured, the national flag carrier’s managing director, agreed with comments made by Diane Shurland, Antigua-based legal counsel for fellow regional airline, LIAT, during a panel discussion at the State of the Industry Tourism Conference (SOITC).

Ms Shurland stated:

Tribune Business Reporter

nmckenzie@tribunemedia.net TAXES and fees account for up to 50 percent of airline ticket costs in the Caribbean, it was revealed yesterday, with Bahamasair’s top executive admitting these levies sometimes exceeded airline ticket revenue.

“It is near impossible to encourage people to travel and support the tourism industry if you have growing taxes, fees and charges.

It is near 50 percent of your ticket costs. Look at the description of your charges and judge for yourself. It makes the industry extremely difficult.”

Responding to that point, Mr Cooper said:

“At Bahamasair our ticket prices to Miami and Fort Lauderdale are around $300-$350, and out of that $152 is taxes. In some instances, if we are having promotions it’s not even a 50/50 thing. We are not actually pairing the price of the ticket or the revenue that comes to Bahamasair; it is actually less than the tax on the ticket.”

To further underscore the point on affordability and access, Mr Cooper said that to get from Nassau to Miami a passenger would pay more than flying from Miami to Las Vegas.

“If you were to compare apples to apples and remove the taxes, then my $150$180 would beat that airfare to Las Vegas any day of the week,” said Mr Cooper.

Tourism ministry targets FLAG CARRIER’S CHIEF BACKS south Florida Hispanics STANDARDISED REGULATIONS THE Ministry of Tourism’s marketing team targeted south Florida’s Hispanic community through its sponsorship of the La Mano Hispana 2018 Art Gallery Opening Night in Miami.

The Bahamas’ sponsorship of the event resulted from its partnership with the City of Hialeah’s communications and special events department. “October is ‘Hispanic Heritage Month’, and participating as a title sponsor at La Mano Hispana Art Gallery Event enabled us to tap into the Hispanic market and reach the hundreds of attendees,” said Tina Lee, district marketing manager for the Bahamas Tourist Office, Florida.

Ms Lee said many attendees seemed “genuinely surprised to see us there”. The Hialeah, Miami, area is home to some 224,000 Hispanics, and she added: “Our primary goal is to connect with the Hispanic community and expose our brand to them.”

The Bahamas is the nearest international neighbour to south Florida, and Bimini is known as the gateway to the country.

FRS Caribbean, a ferry service that transports passengers between south Florida and Bimini, partnered with the ministry at the booth during the Art Gallery’s opening.

“Having a booth at the event served as a platform for our brand presence and allowed us to begin developing relationships within the Hispanic community in

By NATARIO MCKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

TINA LEE, district marketing manager for the Bahamas Tourist Office in Florida, being interviewed by Hialeah Travel station (Channel 77 on Comcast).

A GROUP shot at The Bahamas booth during the Hispanic Art Gallery Opening. From left: Veronica Bolanos, FRS Caribbeean; Gina Madariaga, City of Hialeah communications and special events department; Phylia Shivers, Bahamas Tourist Office, Florida;; Tina Lee, BTO Florida; Adrian Kemp, BTO senior marketing representative; and Macarena Berrocosa of FRS Caribbean.

Miami,” said Ms Lee. The booth was manned by herself; Phylia Shivers, senior marketing representative, Bahamas Tourist Office (BTO) Florida; Adrian Kemp, senior marketing representative,

BAHAMASAIR’S top executive yesterday said a “commonised” regulatory structure for airlines operating within the Caribbean could increase passenger traffic and intra-region connections.

Tracey Cooper, a panellist during a session on aviation at the State of the Industry Tourism Conference (SOITC), said there are roughly 48 million available seats to the Caribbean from North America and 12.5 million from Europe. Yet interCaribbean travel only has around six million seats available.

“We know that we have had some problems because we have actually had regression of available seats around the Caribbean, and that we have had some airlines that departed altogether,” Mr Cooper said.

“We have not seen a growth spurt, as airlines within the Caribbean, to be our own inter-Caribbean connection.” Mr Cooper added that efforts are underway, with the help of organisations such as

BTO Florida; and Veronica Bolanos and Macarena Berrocoso, representing FRS Caribbean.

The current La Mano Hispana 2018 exhibition will continue at the Gallery through December 4.

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markets into the Caribbean and, by extension, The Bahamas.”

Acknowledging that there are significant investments in the region from Asian investors, Mr Cooper added: “We are looking as well to see how we can connect to the Asian carriers given their ability to take a lot of people to various tourist destinations. We just have to connect up with them.”

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the International Air Transport Association (IATA) and CARICPM to improve on inter-Caribbean connections.

“I could see very easily how we could tie it in. I don’t see why we can’t make it work. I think it will take some good co-ordination and effort,” said Mr Cooper.

Speaking to the issues impacting the potential for inter-Caribbean travel, Mr Cooper added: “We have to work on this, but every country in the region has its own regulations, which becomes complex. When we fly around the Caribbean we don’t go to just one body; it is a whole lot of regulatory and legal matters that you have to deal with in a very small area.

“If we are going to make this work, being able to have commonality through regulations is key. As far as being able to get the regulation commonised, it would help us greatly in being able to have a common Caribbean network.”

As for Bahamasair’s expansion plans, Mr Cooper said: “Our strategic expansion is about how we connect and look at markets that are really not main

CUSTOMER SERVICE REPRESENTATIVE (TELLER) Job Summary Fidelity Bank (Bahamas) Limited, is seeking proficient, service-oriented Customer Service Representatives (Tellers) to join our team. This position requires a great attitude, professional out-going personality, with a high degree of precision and competence in performing non-credit banking services to our customers.

Main Duties and Responsibilities: • • • • • •

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Requirements/Qualifications: • • • • • •

High school diploma or equivalent vocational training A minimum of 2 years’ experience in the Financial Services Industry, Hospitality Industry or as a Cashier Excellent communication skills (verbal and written) Proficient at Microsoft Office Suite programs Ability to work in a self-motivated environment with little supervision Ability to manage the administration of multiple tasks simultaneously

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PAGE 4, Friday, October 5, 2018

THE TRIBUNE

Lucayan chair slams ‘nasty, torturous’ close FROM PAGE ONE despite the underlying lease having been terminated when Memories abandoned the resort in January 2017.

The dispute relates to the deal to entice Canadian tour operator, Sunwing, to open the former Reef hotel with its Memories brand. As part of the agreement, the former Christie administration agreed to guarantee its monthly lease/rental payments to Hutchison Whampoa.

Memories’ deal foundered after the Hong Kong conglomerate, as landlord, failed to repair Hurricane Matthew-related damage to the property in the aftermath of the October 2016 storm, resulting in the Canadian resort’s

departure with 400-500 direct job losses.

Despite Lucayan Renewal Holdings’ belief that the Memories pull-out effectively terminated the lease, the Christie administration decided to honour the guarantee by paying Hutchison Whampoa the $300,000 per month rental fee from January 2017 onwards - a practice continued by the current government.

As a result, Hutchison Whampoa has likely earned around $6m from the lease guarantee over the past 20 months, saddling Bahamian taxpayers and the Public Treasury with another burden they could ill-afford.

The Memories lease also highlights the ever-growing costs that taxpayers and the Government are incurring in relation to the Grand

Lucayan acquisition, with Hutchison Whampoa seemingly trying to squeeze every last cent out of the property before it exits.

Besides the $65m purchase price, the Government has also committed to a $2m subsidy to cover Hutchison Whampoa’s operating losses between August 1 and September 11, and waived the payment of $3.25m in stamp duty on the conveyancing by the Hong Kong conglomerate. The latter also walked away with $80-$85m in Hurricane Matthew insurance proceeds, rather than put them into repairs.

Mr Scott declined to comment further yesterday on the “closing of accounts” negotiations, which typically involve a purchaser and seller settling how much the former should pay for inventory,

such as food and beverage supplies, that they inherit upon the completion of a hotel purchase.

Tribune Business sources reported last week that “trying to agree the final numbers, the accounts” on the Grand Lucayan’s inventories was another issue yet to be settled. They revealed that Lucayan Renewal Holdings had hired a team of accountants to assess, and value, the inventories inherited after being presented with a series of bills

by Hutchison Whampoa.

Once the acquisition’s closing is completed, and receives government approval, Lucayan Renewal Holdings will then be able to focus on readying the property for potential sale. It will have to obtain an appraisal of the property’s value, and complete documents that will be made available to potential buyers in a sales process, as well as oversee a voluntary separation process for Grand Lucayan staff wishing to leave.

Meanwhile Mick Holding, the Grand Bahama

Chamber of Commerce’s president, told Tribune Business that the ninefigure subsidies demanded by the last private buyer to negotiate with Hutchison Whampoa, the Wynn Group, more than justified the Government’s move to acquire the property itself.

“My position remains the same, as I have often said, in that I don’t believe in government ownership of businesses that belong in the private sector, but this one was a needs must,” he said.

“I think they’ve done the right thing. They’re taking one of the players [Hutchison] out of the equation, and seeking a buyer. But it’s not just a buyer; it’s finding the right buyer.”

Mr Holding said the Grand Lucayan needed more than just a product upgrade, with the resort needing to rebuild its marketing and airlift presence.

He added that he was not surprised by the level of taxpayer subsidies Wynn had sought, and suggested the issue was likely “to be a factor” in any negotiations

with a new purchaser.

“With the [Wynn] negotiations going on as long as they were, part of it had to be down to the level of subsidies requested,” he told Tribune Business. “I always thought it was somewhere in the background and one of the factors, given how long the negotiations were taking.

“There will be a potential trade-off between the selling price and the subsidy. If the Government is prepared to take a hit on the selling price, they may not have to make so many ongoing concessions.”

The Wynn Group requested a $159m subsidy in its first revised offer, and its final bid included a 20 percent electricity rate discount, hundreds of work permits, and Government guarantees to cover any losses and guarantee a seven percent investment return.

The Government cited this as justification for why it believed it would be more effective, and cheaper, to acquire the Grand Lucayan itself.

To advertise in The Tribune, contact 502-2394

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THE TRIBUNE

Friday, October 5, 2018, PAGE 5

Govt VAT clarity to unleash $1bn of development FROM PAGE ONE last week’s meeting that the industry was interpreting the budget in a way that the Government never intended.

They pledged changes will be introduced to make it clear that all construction and development-related activities will be treated as “taxable supplies” for VAT purposes, therefore allowing developers to reclaim their “input” tax payments.

Hailing the long-awaited clarification, the Association said the move would unlock multi-million dollar projects that had been placed on hold pending this decision. Palm Cay’s $100m One Marina expansion was said to be among the developments that will now move forward, while another unnamed developer said they had “revived enthusiasm” for a high-end 12-acre project.

Jason Kinsale, Aristo Development’s president, told Tribune Business yesterday that last week’s meeting and clarification had “taken away one more level of stress” faced by himself and other developers.

“I think it provides a tremendous amount of confidence going forward for developers to recognise the fact that we’re able to claim the VAT back,” he said.

“We’ve been told a mechanism has been provided to ensure that flows smoothly.

“We weren’t looking for concessions; we were looking for the ability to claim back the VAT spent. Now that’s been addressed, that eases the burden of having to make up the 12 percent.

There was no ability for the end buyer to absorb additional costs, or for us to absorb a 12 percent increase in costs that was never factored into any business plan.

“The reality is that by the end of these projects we have made a 15 percent profit margin, and adding 12 percent VAT would bring it

MEMBERS of the Bahamas Developers Association met with K Peter Turnquest, deputy prime minister, to discuss concerns impeding major developments. Although industry principals welcomed his assurances, they await implementation and timeline specifics. down to just three percent.

The likelihood was these projects would be affected dramatically to the point where they were not economically viable.”

Mr Kinsale, who has spearheaded the development of projects such as the Balmoral Club, ONE Cable Beach and THIRTY-SIX on Paradise Island, said previous interpretations of the Budget’s tax changes had deterred developers from wanting to invest in new projects.

They had also threatened to have “a monumental impact” on projects already underway, and the Aristo chief said 12 percent VAT would have been impossible to absorb given the “dramatic increase” in construction costs experienced in recent years.

Confirming that the VAT “recovery” uncertainty could have frozen the real estate development industry without the Government’s action, Mr Kinsale said “everyone seems relieved” following the outcome of last week’s meeting with the deputy prime minister.

“Everyone seems relieved,” he added. “It gives you that confidence needed to take the leap forward. I think there’s quite a few large projects going on right now, and so I think

everyone just feels relieved.

It’s one more level of stress that’s gone away.”

Franon Wilson, Arawak Homes’ president, told Tribune Business that the Government’s clarification was “huge” since it removed a major obstacle to Bahamian home ownership caused by previous Budget interpretations.

He added that it would revive an industry that has “the greatest trickle down effect” in The Bahamas, given real estate development’s ability to generate activity for multiple industries - especially construction, architects, engineers, attorneys and others involved in providing housing-related services.

“The group was so pleased to hear them [Messrs Turnquest and Johnson] say that, with the changes made, the intent of the Government was never to do what some people interpreted the changes to have done,” Mr Wilson said.

“Developers were able to clarify matters at the meeting and, in so doing, it made a positive impact for development in The Bahamas. The bottom line is that they never intended to do what some people thought the changes were intended to do. The Government clarified that their intent was not to stop or slow

down construction in The Bahamas.”

The Arawak Homes chief said previous interpretations of the budget’s tax changes suggested they would cause a significant increase in construction costs, potentially placing home ownership beyond the reach of many Bahamians.

“Someone wanting to get a home right now, if the cost for a home and lot package was $200,000, the changes as interpreted would have had the effect of adding $24,000 on to the price,” Mr Wilson added. “That would have been a serious challenge for developers and homeowners in The Bahamas for sure.

“I can tell you first hand that home ownership would have been a serious challenge because people’s incomes have not gone up, and they’ve not gone up proportionately to the escalating costs of real estate.

“Adding 12 percent to the cost of a home would have resulted in many people qualifying for 12 percent less, or struggling to qualify with the bank and meet the lending criteria. It’s definitely a big deal.”

Mr Wilson said details on the system that will allow developers to reclaim their VAT “inputs” still have to be worked out, noting that the issue was “time sensitive” and the sums involved

potentially large for both the Government and industry.

Yet he added: “The trickle down effect from real estate is the greatest in the country.

“When you talk about construction projects you need the banks, lawyers, people in the field, architects and engineers. This is one of the main drivers, if not the biggest driver, in the country. If we’re doing great the country is doing great.”

Mr Johnson, meanwhile, confirmed that the Government would clarify its real estate/construction VAT policy to make clear that these activities are “taxable supplies”, so developers can claim “input” credits.

“It was just a matter of clarifying the policy,” he told Tribune Business.

“When we reverted back to the straight stamp duty on real estate, that caused the confusion.

“We wanted to clarify that all construction activities and development activities are taxable supplies and can be reclaimed as VAT inputs.

“The transaction related to the actual sale of property is VAT exempt, but the materials used are taxable supplies, so they can be reclaimed.”

Representatives or principals from Albany; Arawak Homes; Sterling Hurricane Hole and Sterling Global Developments; Aristo Development; Palm Cay; Baker’s Bay; Passerine at Abaco Holdings; Starfish Construction; Children’s Bay Cay; and Williams Cay, Exuma, were among those who attended last week’s meeting along with two attorneys and a real estate accounting specialist.

An association spokesperson said: “There was a grave concern among developers about a change in the ability to claim back costs on VAT returns when the budget that took effect July 1 was announced.

“It was a right every other business had, and suddenly developers and builders were deprived of that. The

change created immediate alarm and threatened to impact construction jobs, real estate and investment.

“Given that there is such a small profit margin in development, a sudden increase of 12 percent with the elimination of credits for material outlay was enough to bring sections of the industry to a grinding halt,” they continued.

“We had been seeking a meeting to try to resolve the issue so some of the projects that were on hold, and others that were considering scaling back, could move forward. We got that meeting on September 27 and it went well. We now await specifics and timelines.”

The deputy prime minister and Mr Johnson had described the language used as an “inadvertent accidental oversight”, with Mr Turnquest saying: “My technical team and I stand by to assist, and you will be pleased to know that we are making changes in the DIR (Department of Inland Revenue) to expedite and facilitate payment of the VAT credits which you are due.”

Developers had also complained of long waits to receive VAT credits and refunds, with one condo developer said to be owed millions of dollars.

“All we were asking for was the same thing every business has: The right to claim back costs on VAT returns. Without that, costs would soar so high that some projects underway would have been in jeopardy for completion. New projects were put on hold or sent back to the drawing table for reconsideration,” said the Association spokesman.

“It was like a tsunami of development costs coming in on a tide of trouble, so we are greatly relieved that resolution was achieved and the industry can move forward, but we do need confirmation of processes along with the welcome assurances of remedy.”

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PAGE 6, Friday, October 5, 2018

THE TRIBUNE

BAHAMIANS PAY PRICE OF ‘DOUBLE BPL WHAMMY’ FROM PAGE ONE

its Blue Hills plant, and more expensive fuel, to meet the capital’s electricity needs, Mr Heastie said the fires had exacerbated the spike in global oil prices that were being passed on to BPL customers through its fuel charge.

Responding to complaints

over soaring energy costs, the BPL chief said: “Those two [fire-hit] assets would normally produce roughly 63 megawatts (MW), but we typically run them at 50-55 MW. “When we are not running those two units then we have to rely on that capacity coming from the diesel-burning assets at Blue Hills. When you look at the

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total loan for New Providence, which averages about 200 MW, that there alone is 25 percent of the total load.

“The double whammy is they are not only a lower fuel cost, but more efficient machines. We get more power out of those machines per barrel than we get at Blue Hills, so the efficiency of the assets at Clifton Pier is higher. They’re burning a higher value fuel in as much as we can get more power out of a barrel of HFO than we can get out of a barrel of diesel.”

Mr Heastie said the per barrel price of Clifton Pier’s heavy fuel oil was currently around $69-$70, whereas that for the diesel fuel employed at Blue Hills and which BPL is currently having to rely on much more - is around $90 per barrel.

That represents a $20 difference, and BPL’s chief executive conceded that this is what makes “a significant impact in terms of what the customer pays”.

He backed Tribune Business’s assessment that the Clifton Pier fires had exacerbated the impact of rising global oil prices in increasing

Bahamian light bills, saying: “That’s exactly what’s happening here.”

He added: “It’s also worthy to note, because we do have some customers who feel the fuel charge is something that the power company should absorb, that this is a direct pass through.

“Whatever we use in barrels and price we divvy it up and pass it on to the customer. If we don’t do that, the power company will be out of business. It’s important to understand we don’t make a cent off of fuel; we make nothing off of fuel.”

The Central Bank of The Bahamas, in its monthly report for August, found that BPL’s surcharge had increased by 26.7 percent year-over-year, hitting 17.47 per kilowatt hour that month - a rise of 0.5 percent compared to July.

Global oil prices continued to inch up yesterday, with the Brent Crude and West Texas Intermediate indices, the two most commonly used, hitting $85.04 and $74.85 per barrel respectively. These continued increases, combined with the Clifton Pier fires,

FROM PAGE ONE representatives for the preferred bidder confirmed that negotiations were progressing, and expressed optimism that they would be successfully completed within the target 30-day timeframe.

That timeline expires early this month, but Mr Ferreira - who previously indicated this is not a “must meet” deadline - said he and the Government were more focused on getting the contract’s terms and conditions correct to the satisfaction of both parties and New Providence’s waste management needs.

“I know they are trying to meet the deadline, but the logistics have to be sorted out and both sides have to be satisfied,” he told Tribune

THURSDAY, 4 OCTOBER 2018

Business. “Both sides have to commit to realistic expectations for the contract to be implemented, and the expectations have to meet the needs of the Bahamian people and needs of the country moving forward.

“This is an important first step in looking at the way we manage solid waste. It’s the first of it’s kind in the country, and both sides are enthusiastic to complete the process and move on to the next phase.”

Mr Ferreira said he “cannot emphasise enough” the importance of getting the terms with Providence Advisors/WRDG right, adding: “This is a contractual relationship entered into between two parties.

“I cannot begin to overstate the importance of getting the terms and

t. 242.323.2330 | f. 242.323.2320 | www.bisxbahamas.com

BISX ALL SHARE INDEX: CLOSE 1,946.85 | CHG -0.12 | %CHG -0.01 | YTD -116.72 | YTD% -5.66 BISX LISTED & TRADED SECURITIES 52WK LOW 3.50 19.17 7.50 3.32 0.90 0.15 2.30 8.55 6.09 3.54 9.00 2.30 1.40 7.25 6.00 9.75 5.67 3.25 12.50

1050.00 1000.00 1000.00 1000.00

1000.00 1000.00 1000.00 1000.00

PREFERENCE SHARES

1.00 103.00 100.00 106.00 105.00 103.00 100.00 10.00 1.01

1.00 100.00 100.00 100.00 100.00 100.00 100.00 10.00 1.00

SECURITY AML Foods Limited APD Limited Bahamas Property Fund Bahamas Waste Bank of Bahamas Benchmark Cable Bahamas CIBC FirstCaribbean Bank Colina Holdings Commonwealth Bank Commonwealth Brewery Consolidated Water BDRs Doctor's Hospital Emera Incorporated Famguard Fidelity Bank Finco Focol J. S. Johnson Cable Bahamas Series 6 Cable Bahamas Series 8 Cable Bahamas Series 9 Cable Bahamas Series 10 Colina Holdings Class A Commonwealth Bank Class E Commonwealth Bank Class J Commonwealth Bank Class K Commonwealth Bank Class L Commonwealth Bank Class M Commonwealth Bank Class N Fidelity Bank Class A Focol Class B

CORPORATE DEBT - (percentage pricing) 52WK HI 100.00

52WK LOW 100.00

115.92 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 ##########

104.79 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

SYMBOL AML APD BPF BWL BOB BBL CAB CIB CHL CBL CBB CWCB DHS EMAB FAM FBB FIN FCL JSJ CAB6 CAB8 CAB9 CAB10 CHLA CBLE CBLJ CBLK CBLL CBLM CBLN FBBA FCLB

SECURITY Fidelity Bank Note 22 (Series B) +

SYMBOL FBB22

Bahamas Note 6.95 (2029) BGS: 2015-1-3Y BGS: 2014-12-5Y BGS: 2015-1-5Y BGS: 2014-12-7Y BGS: 2015-1-7Y BGS: 2014-12-30Y BGS: 2015-1-30Y BGS: 2015-6-3Y BGS: 2015-6-5Y BGS: 2015-6-7Y BGS: 2015-6-30Y BGS: 2015-10-3Y BGS: 2015-10-5Y BGS: 2015-10-7Y

BAH29 BG0203 BG0105 BG0205 BG0107 BG0207 BG0130 BG0230 BG0303 BG0305 BG0307 BG0330 BG0403 BG0405 BG0407

BAHAMAS GOVERNMENT STOCK - (percentage pricing)

LAST CLOSE 3.51 17.43 9.09 4.46 1.01 0.19 2.30 9.22 6.16 3.60 12.42 2.69 1.75 7.52 6.21 13.20 6.35 3.65 13.01

CLOSE 3.51 17.43 9.09 4.46 1.01 0.19 2.30 9.22 6.16 3.60 12.42 2.65 1.75 7.41 6.21 13.20 6.35 3.65 13.01

CHANGE 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.04 0.00 -0.11 0.00 0.00 0.00 0.00 0.00

1000.00 1000.00 1000.00 1000.00 1.00 100.00 100.00 100.40 100.00 100.00 100.00 10.00 1.00

1000.00 1000.00 1000.00 1000.00 1.00 100.00 100.00 100.40 100.00 100.00 100.00 10.00 1.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

CLOSE 100.00

CHANGE 0.00

106.73 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

-0.57 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

LAST SALE 100.00 107.30 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

VOLUME

VOLUME

EPS$ 0.268 0.932 -0.306 0.317 0.059 0.000 -0.996 0.700 0.441 0.154 0.627 0.102 0.231 0.000 0.670 0.701 0.719 0.277 0.631

DIV$ 0.100 1.130 0.000 0.230 0.000 0.010 0.000 0.710 0.220 0.120 0.620 0.060 0.070 0.084 0.280 0.500 0.200 0.120 0.590

P/E 13.1 18.7 N/M 14.1 N/M N/M -2.3 13.2 14.0 23.4 19.8 26.0 7.6 N/M 9.3 18.8 8.8 13.2 20.6

YIELD 2.85% 6.48% 0.00% 5.16% 0.00% 5.26% 0.00% 7.70% 3.57% 3.33% 4.99% 2.26% 4.00% 1.13% 4.51% 3.79% 3.15% 3.29% 4.53%

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.00% 0.00% 0.00% 0.00% 6.25% 6.25% 6.25% 6.25% 6.25% 6.25% 6.25% 7.00% 6.50%

INTEREST Prime + 1.75% 6.95% 4.00% 4.25% 4.25% 4.50% 4.50% 6.25% 6.25% 4.00% 4.25% 4.50% 6.25% 3.50% 3.88% 4.25%

MATURITY 19-Oct-2022 ############### 30-Jul-2018 16-Dec-2019 30-Jul-2020 15-Dec-2021 30-Jul-2022 15-Dec-2044 30-Jul-2045 26-Jun-2018 26-Jun-2020 26-Jun-2022 26-Jun-2045 15-Oct-2018 15-Oct-2020 15-Oct-2022

MUTUAL FUNDS 52WK HI 2.17 4.16 2.01 180.30 157.58 1.57 1.70 1.65 1.10 6.99 8.54 6.15 10.52 11.46 10.46 10.00 8.45 11.20

52WK LOW 1.67 3.04 1.68 164.74 116.70 1.51 1.64 1.59 1.08 6.41 7.62 5.66 8.65 10.54 9.57 9.88 8.45 11.20

FUND CFAL Bond Fund CFAL Balanced Fund CFAL Money Market Fund CFAL Global Bond Fund CFAL Global Equity Fund FG Financial Preferred Income Fund FG Financial Growth Fund FG Financial Diversified Fund FG Financial Global USD Bond Fund Royal Fidelity Bahamas Opportunities Fund - Secured Balanced Fund Royal Fidelity Bahamas Opportunities Fund - Targeted Equity Fund Royal Fidelity Bahamas Opportunities Fund - Prime Income Fund Royal Fidelity Int'l Fund - Equities Sub Fund Royal Fidelity Int'l Fund - High Yield Fund Royal Fidelity Int'l Fund - Alternative Strategies Fund Colonial Bahamas Fund Class D Colonial Bahamas Fund Class E Colonial Bahamas Fund Class F

NAV 2.17 4.15 2.01 180.30 155.10 1.57 1.69 1.65 1.10 7.36 8.53 6.50 11.41 11.66 10.41 9.93 8.45 11.20

YTD% 12 MTH% 2.58% 4.11% 0.39% 5.07% 1.47% 2.34% 0.90% 3.44% 1.11% 6.05% 2.88% 4.24% -0.49% 4.11% 2.09% 4.19% 0.06% 0.72% -1.08% 1.77% -5.96% -3.05% 1.90% 4.59% 7.24% 11.96% 2.77% 3.88% 3.94% 4.69% -0.61% 0.75% 1.13% N/A 2.95% N/A

NAV Date 31-Aug-2018 31-Aug-2018 31-Aug-2018 30-Jun-2018 30-Jun-2018 31-Aug-2018 31-Aug-2018 31-Aug-2018 31-Aug-2018 31-Aug-2018 31-Aug-2018 31-Aug-2018 31-Aug-2018 31-Aug-2018 31-Aug-2018 30-Jun-2018 30-Jun-2018 30-Jun-2018

MARKET TERMS BISX ALL SHARE INDEX - 19 Dec 02 = 1,000.00 52wk-Hi - Highest closing price in last 52 weeks 52wk-Low - Lowest closing price in last 52 weeks Previous Close - Previous day's weighted price for daily volume Today's Close - Current day's weighted price for daily volume Change - Change in closing price from day to day Daily Vol. - Number of total shares traded today DIV $ - Dividends per share paid in the last 12 months P/E - Closing price divided by the last 12 month earnings

135 megawatt (MW) output from units still in their “useful life”.

This, he conceded, had left BPL in an “upside down” position where it is having to consistently run the 180 MW Blue Hills plant at or near capacity to cope with New Providence’s peak summer demand of 240 MW. Speaking one month before the fires, he added: “The challenge we have is Clifton Pier is not performing the way it should be performing. The question is how we can go about getting the assets to where they can be, and performing at the level they should be.

“That’s an evaluation we’re undertaking right now.

I certainly feel confident, based on my experience, that we can get Clifton Pier to put out 80 percent of its rated capacity on the ‘B’ and ‘C’ stations.

“At Clifton Pier today there’s about 135 MW of good assets available to us. Today we’re running between 50-60 MW on a good day. We’re running Blue Hills hard every day, especially at this time of year.”

Landfill contract is ‘blueprint for future’

MARKET REPORT 52WK HI 4.50 19.17 7.50 4.46 1.26 0.19 3.92 9.22 6.60 5.30 12.50 2.71 1.77 8.21 6.21 13.20 7.00 4.50 13.50

highlight The Bahamas’ ongoing vulnerability as a result of its near-100 percent reliance on fossil fuels and the shaky nature of BPL’s generation and distribution infrastructure.

Mr Heastie yesterday reiterated that the stress on consumer light bills and BPL should ease as The Bahamas heads into the fall and winter, given that energy demand typically drops during this period. The utility is also aiming to return a generation unit taken out for maintenance to its supply capacity by month’s end.

“We are working to complete overhaul and return to service one of the more efficient units at Clifton Pier by end of this month. As we move toward the cooler months, we will see a drop in demand and only the more efficient units will be used, resulting in a decrease in the fuel charge to customers,” BPL said yesterday.

Mr Heastie, in an interview with Tribune Business earlier this year, revealed that BPL was already in trouble at Clifton Pier because it was producing just 37-44 percent of its potential

YIELD - last 12 month dividends divided by closing price Bid $ - Buying price of Colina and Fidelity Ask $ - Selling price of Colina and fidelity Last Price - Last traded over-the-counter price Weekly Vol. - Trading volume of the prior week EPS $ - A company's reported earnings per share for the last 12 mths NAV - Net Asset Value N/M - Not Meaningful

TO TRADE CALL: CFAL 242-502-7010 | ROYALFIDELITY 242-356-7764 | FG CAPITAL MARKETS 242-396-4000 | COLONIAL 242-502-7525 | LENO 242-396-3225

conditions correct so we have a plan moving forward and everyone understands what is expected of them, and we have a blueprint for the future.”

Describing the Government’s negotiating team as “the creme de la creme” of the public sector, Mr Ferreira said he wanted the group of engineers, sanitation experts, accountants and attorneys to remain together so that their expertise can be “transposed to other landfills and see what can be done in terms of management”.

The minister added that the New Providence landfill management contract needed to be sufficiently flexible as to enable the two sides to adjust to The Bahamas’ needs and development goals as the situation required.

“While we must acknowledge current circumstances and challenges, we must be forward looking and take into account changes in best

practices, changes in industry, and respond to the needs of the country,” he said.

“I have every confidence in the process because, let me put it this way, if you do the right thing, the right thing will happen to you. I believe we’ve done the right thing in terms of the expertise we’ve brought to bear in terms of the best the public sector has to offer and engaging members of the private sector.

Kenwood Kerr, Providence Advisors’ chief executive, told Tribune Business he was confident that the landfill contract would be completed within the targeted timeframe.

“It’s moving along and everybody’s working to get it done in the allotted timeframe. We’re working towards a mutually beneficial conclusion,” he said. “I can’t predict the future, but outside of things we can’t control it’s going as planned. Everyone is working and moving in the same direction.”

NOTICE NOTICE is hereby given that NOLA JOY RICHARDS KNOWLES, of P. O. Box General Delivery, Lowe Sound, North Andros, 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 28th day of September, 2018 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, Bahamas.

NOTICE Notice is hereby given that CHERISNORD CHERY of peach Street,Nassau, The 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 signed statement of the facts within twenty-eight days from the 28th September, 2018 to the Minister responsible for Nationality and Citizenship, P.O.Box N7147, Nassau, The Bahamas.

NOTICE Notice is hereby given that Sonia Simeon Garcon of #44 Strafford Way, South Bahamia, Freeport, Grand Bahama, 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 signed statement of the facts within twenty-eight days from the 28th September, 2018 to the Minister responsible for Nationality and Citizenship, P.O.Box N7147, Nassau, The Bahamas.

THE TRIBUNE

Friday, October 5, 2018, PAGE 7

New Zealand fines travelers who won’t unlock secure devices CANBERRA, AUSTRALIA Associated Press VISITORS to New Zealand can be fined 5,000 New Zealand dollars ($3,243) for refusing to provide passwords to unlock electronic devices and allow customs officials to examine them under a new law that a civil liberties group yesterday condemned as a grave invasion of privacy.

The law came into effect on Oct 1 as part of an update of 22-year-old customs legislation. It also gives customs officials authority to copy data found on searched devices.

“The traveling public is unlikely to notice much difference at the border,” the New Zealand Customs Service said in a statement last week.

But the New Zealand Council for Civil Liberties said the law gives customs officials the power to force travelers to unlock their smartphones without

justification, and without legal options for travelers to challenge an order to enter a password.

“Modern smartphones contain a large amount of highly sensitive private information including emails, letters, medical records, personal photos, and very personal photos,” council spokesman Thomas Beagle said in a statement.

“Allowing customs to be able to demand the right to examine and capture all this information is a grave invasion of personal privacy of both the person who owns the device and the people they have communicated with,” Beagle said.

Beagle questioned whether the intrusion would catch criminals, who would prefer to pay the fine than expose evidence that could lead to prison.

Criminals could also store their data in the cloud, travel with a wiped phone and restore the data once they passed customs, he said.

PAGE 8, Friday, October 5, 2018 WASHINGTON Associated Press BIG real estate developers like Donald Trump have long benefited from a myriad of legal loopholes and breaks that can shrink their tax bills.

Their advantages expanded further with the federal tax overhaul that took effect this year.

Even before the new tax law, the US tax code provided loopholes and special breaks that favor wealthy real estate investors. Tax experts say they’re often able to claim losses more quickly and easily than other taxpayers. They are also afforded several ways of delaying or avoiding reporting profits to the Internal Revenue Service.

They can fall behind on their debts and still face fewer tax penalties for having the debt forgiven than other kinds of investors, according to Steve Wamhoff, director of federal tax policy at the Institute on Taxation and Economic Policy.

Trump took advantage of that, Wamhoff says, when he couldn’t repay debts on his Atlantic City casinos in the 1990s and early 2000s.

Wealthy families typically try to transfer some of their assets during their lifetime to ease the tax burden on their heirs. There are a number of ways to do so legally. As assets go, real estate is one of the most flexible options.

But a report this week by The New York Times suggests that the Trump family cheated the IRS for decades, using dubious tax maneuvers and outright fraud in some cases. A lawyer for Trump has disputed the Times’ findings of possible tax fraud or evasion and said that parts of the report are “extremely inaccurate”.

The US has a long history of property ownership and related tax law, says AnneMarie Rhodes, a professor at Loyola University Chicago School of Law. As real estate holdings have gotten more complex in recent years, so have applications of the law.

There’s a fine line between tax avoidance and abuse.

“Real estate types are aggressive ... but the tax

THE TRIBUNE

How big developers like Trump benefit from web of tax breaks

PRESIDENT Donald Trump walks from the Oval Office to the Marine One on the South Lawn of the White House in Washington for the short trip to Andrews Air Force Base where he will travel to Minnesota. Big real estate developers like Donald Trump have long benefited from a myriad of legal loopholes and breaks that can shrink their tax bills. Expanding their advantages, the federal tax overhaul that took effect this year handed real estate interests some additional benefits.

Photo: Susan Walsh/AP code has kind of encouraged it,” Rhodes said in an interview. “If you look at taxes and credits and benefits, it’s only rivaled by oil and gas interests. That is because they have lobbies that are effective.”

As president, Trump touted the new tax legislation as fulfilling a key campaign promise to help the middle class. Trump and Republican lawmakers insisted the $1.5tn tax-cutting package would benefit middle-class Americans — not the wealthy.

“I think there’s very little

benefit for people of wealth,” Trump said last fall. “This is going to cost me a fortune.”

But a key provision delivered a steep tax break for a kind of business set up by owners of profitable firms, including Trump and his family. The law allowed a 20 percent deduction against income taxes for businesses whose profits are taxed at the owners’ personal income rate. They’re known as “pass-through” companies because their profits are funneled into the owner’s personal tax bucket. Those

businesses span a huge range, from the local florist and family-owned restaurant to law firms, hedge funds and privately held large firms — such as real estate companies and the Trump family’s property empire.

Trump himself has owned about 500 entities structured as pass-throughs, according to his lawyers, making the Trump Organization less a single business than a grabbag of units drawing on the fancier parts of the tax code: sole proprietorships and limited-liability partnerships.

The legislation’s tax break for “pass-throughs” was a sweet deal for real estate moguls and landlords as it passed the House of Representatives.

But the story didn’t end there. The Senate’s version clamped in a restriction on taking the new “passthrough” deduction. Only businesses that pay substantial wages to employees, compared with the amounts they spend on equipment or property, would qualify.

Real estate developers tend to have relatively few

employees — and hefty capital investment in buildings that generate rent.

Senate GOP leaders changed that in late-stage negotiations. They added a provision to the final bill that allows real estate companies to get around the restriction, by using a formula that takes into account the amount paid for property as well as wages.

Another boon for real estate developers came in the new tax law’s treatment of “like-kind exchanges”.

The exchanges, especially favoured by real estate investors, allow a property owner to defer paying tax on property if — rather than selling it — they exchange it for a similar property.

The law interprets that broadly. An office building can be exchanged for a warehouse or an apartment complex, for example.

The new tax law eliminated the like-kind favorable tax treatment for exchanges of personal property — but preserved it for real estate.

Using the long-standing allowances in the tax code, property is often handed over within a family. These can be legitimate transactions, but they hinge on how the assets are valued. If the valuation is compromised, it could cross the line into illegal conduct.

While there are tax laws governing valuations, the Internal Revenue Service lacks the resources to verify the information in every case, said Bridget Crawford, a law professor at Pace University.

Crawford maintains Trump’s family has been doing this for generations — transferring property for a stunningly low value that has never been questioned. For some less wealthy families, it may not even have occurred to them that they’re required to pay a tax on the transfer of a family home, and the law is rarely enforced, Crawford said. It is illegal to skirt the law willingly and knowingly, and if an attorney or CPA advises a client to do so, they are violating their professional ethics.

Crawford cautions: “It’s not just a problem for the Trump family, it’s trouble for all families.”