Palacios: It’s time to evaluate QC program

A lawmaker is pushing for the re-evaluation and revision of the government’s tax incentives for businesses under the Qualifying Certificate program to see if it is working as intended.

In particular, Saipan Rep. Arnold Palacios wants to know if the program actually benefits the government.

“It should be revised to ensure that we’re getting the benefits due us. We want to make sure the government is not unnecessarily relinquishing its tax benefits,” he said.

He noted that the original coverage of the law was limited to new businesses but it was eventually amended to include existing businesses that, he said, essentially allowed almost everybody from paying regular taxes to the cash-strapped government.

“Is this really working? Up to what extent will we go on with this?” he said.

While he acknowledged that jobs are created with business expansion or activities, these employment opportunities do not go to the local workforce.

“We have no manpower here. What happens is that we bring in workers to get hired by businesses,” he said.

The existing QC program, he said, has attracted more existing businesses rather than new investments.

The program allows up to 25 years in tax relief to qualified applicants.

Palacios said the relief period is another issue to reassess.

“In some countries, tax relief system is good only for five years. After that, the government begins collecting the right taxes,” he said.

Originally, the CNMI QC program called for a three-year incentive deadline but lawmakers later changed it to 25 years.

So far the law, enacted during the 12th Legislature, has undergone at least three amendments to address the needs of existing businesses in the CNMI.

The Commonwealth Development Authority, which administers the program, has said that the first amendment sought to entice new investments, the second was to help existing businesses keep up with new competitors, and third was a tax break incentive for businesses that have weathered the economic crisis since 1999.

The CDA earlier expressed confidence that while the program was generous “it will not impoverish the CNMI.”

Palacios said he would ask the CDA to provide an analysis and related information on the program.

Known as the Investment Incentive Act of 2000, the program offers companies up to 100 percent in tax rebates and/or abatements for a period of up to 25 years.

The program aims to strengthen the existing tourism and garment industries and, at the same time, develop new industries by targeting franchise restaurants, waterparks, cultural centers, aquariums, theme parks, convention centers, dinner theater, special events, golf courses, resort hotels and condominiums, manufacturers or processors of high technology products, Internet-related businesses engaged in Internet commerce and Commonwealth-based airlines and other aviation-related activities.

The first company to qualify for the program was SandCastle-Saipan in 2002.

Several other companies applied and were granted tax incentives.