The government tabled the Disaster Reconstruction Authority, Special Economic Recovery Zone (SERZ) Relief Order, 2019 in the House of Assembly yesterday, which outlines the tax relief provisions for Grand Bahama and Abaco and relieves confusion over the distribution of the special economic zones and how they work.
The SERZ was tabled by Deputy Prime Minister and Minister of Finance Peter Turnquest, who also explained that those who attempt to abuse the tax relief provisions will be prosecuted.
“We will and we must have sufficient controls in place to prevent abuse, and we will apply the full weight of the law against those who take advantage of the system to the detriment of those actually in need,” Turnquest said.
“This is not a universal tax holiday and it is not a free-for-all.
“The package of tax breaks under the SERZ order are for the people of Grand Bahama, the people of Sweeting’s Cay, Water Cay and Deep Water Cay, and the people of Great Abaco and the Abaco Cays.”
Turnquest explained that the package of tax breaks include the exemption of value-added tax (VAT) and duty on approved goods purchased from businesses on Grand Bahama, Abaco or anywhere inside the recovery zone; the exemption of all taxes on goods imported directly into the recovery zone; the tax-free importation of goods bought abroad, through accompanied or unaccompanied baggage brought through the airport or sea port; tax relief from all business license fees, real property tax for property improvements and tax relief on the sale of real estate; a 50 percent discount on VAT for property bought within the recovery zone; and a provision for pre-approved individuals and businesses from the zones to purchase goods with tax breaks from Nassau suppliers or other vendors outside of the zone.
“In the immediate aftermath of the storm, we made a commitment to help the people of Grand Bahama, the people of Sweeting’s Cay, Water Cay and Deep Water Cay, and the people of Great Abaco and the Abaco Cays to rebound from the devastating impact of Hurricane Dorian with the firm support of their government,” Turnquest said.
“Today, we are here to strengthen and expand these efforts, recognizing that the early phases of relief and recovery are behind us and the medium- to long-term recovery and reconstruction is ahead of us. Unlike the previous tax relief measures, the SERZ order delivers a more comprehensive package of tax breaks on the import and purchase of goods and it extends the timeline for people to benefit from the tax breaks to the end of the fiscal year, or June 30, 2020.
“It expands the list of items that are approved for tax waivers and it adds new benefits, including a provision for the VAT-free purchase of all approved goods at the cash register within the SERZ zone. Indeed, the package of tax breaks will allow individuals to rebuild their homes and their lives more affordably and with greater speed.”
According to Turnquest, 9,000 homes and more than 11 million square feet of structures were damaged on both islands during Hurricane Dorian, while 2,894 homes were deemed completely uninhabitable. He said the islands’ housing sectors suffered an estimated $1.48 billion worth of damage.
The list of tax-exempt items in the recovery zone that the government hopes will assist residents in rebuilding includes building supplies, hardware supplies, household furniture, furnishings and appliances, beds and bedding material, air conditioning units, plumbing, electrical fixtures, clothing, personal hygiene products, unprepared food, medical supplies and cleaning supplies.
“Our aim is to help residents of the affected islands reconstruct their homes, rebuild their lives and get back on their feet to pursue their future plans once again,” Turnquest said.
“All of us have friends, family members and coworkers who suffered great losses at the hands of Dorian. But despite it all, most of them simply want to get back home and get back on their feet and it does not matter how many temporary housing facilities are made available. With the provisions under the SERZ order, people affected by Dorian can rebuild their lives more affordably and with greater speed.”
Turnquest said some items not on the approved list include alcohol, tobacco, wines and spirits, chocolates, candies and gum.
“I wish to reiterate that Hurricane Dorian left behind total damages, losses and additional costs estimated at $3.4 billion,” he said.
“For the government, it was a stark reminder of our vulnerability as an island nation to climate change. Further, the impact has imposed a huge fiscal cost on the government, resulting in a revision to our fiscal projections and medium-term plans. In the recently-tabled Fiscal Strategy Report, 2019, I pointed out that the government’s total aggregate expenditure is estimated to increase by $302.6 million. These direct expenditures are compounded by an estimated $236 million in revenue losses on account of the disruption in business activity on the affected islands of Abaco and Grand Bahama.”