House OKs tax incentives for tourism, IT investors

The House of Representatives yesterday paved the way for a proposed tax incentive program for investors in the tourism and high technology industries in yet another effort to boost the islands’ flagging economy.

A measure sponsored by House Floor Leader Oscar M. Babauta laying down such tax breaks is now up for Senate voting after the lower chamber cleared the proposal at the start of its second regular session.

Called the Tourism and Technology Development Incentive Act of 2000, HB 12-199 proposes a waiver of up to 100 percent of all taxes paid by a business covered by the program to the government for the next 25 years.

It also offers 100 percent rebate to owners of individual units of condominiums operated as resort hotels of all income taxes paid on all profits and revenues by the unit owner for 25 years.

Proponents believe the measure, if it becomes law, would spark major renovations and expansion boom in the tourism industry, while enticing new investments in the growing hi-tech sector such as computer and data processing.

“We feel that tourism and high technology manufacturing and processing are the sorts of industries that we should concentrate on expanding,” said a report by the House Commerce and Tourism Committee endorsing the proposal.

Speaker Benigno R. Fitial said the bill is one program being awaited by potential investors who are ready to pump their money into the CNMI once the government provides them the much-needed tax breaks.

“Investors are asking for incentives,” he told members of the House. “If we are not going to give them what they are asking for, we are not going to get these investors.”

Rep. Heinz S. Hofschneider stressed that the proposed tax incentive is a step in the right direction in view of the persistent economic difficulties confronting the islands. “I honestly believe this will stir the economy,” he said during the session.

The representative has been advocating a similar incentive under a qualifying certificate program, which is pending in the lower house, that seeks to provide tax rebates and abatement for all businesses meeting specified government requirements.

Focus

But HB 12-199, which got all 18 votes of the House, zeroes in on only two sectors — tourism and high technology with capital investments as little as $500,000 for art galleries and as much as $10 million for golf resorts that will be newly built.

For existing businesses with expansion plans, the minimum investment requirement is $250,000 for establishments like health spa and theater, while $2.5 million for a hotel or condominium or $5 million for golf resorts.

However, night clubs are not included in the tax break program as the committee, which is chaired by Rep. Bobby T. De Leon Guerrero, felt it is “not appropriate” to do so.

Firms engaged in hi-tech manufacturing and processing, on the other hand, will only have to put in a one million-dollar capital to be eligible in the program, according to the bill.

“This is an industry that has yet to gain a foothold here,” the committee report said.
“The [qualifying certificate program] will give them an incentive to relocate here. High technology manufacturing will offer our citizens the chance to work in high-paying, complex jobs.”

In exchange for the waivers on taxes, beneficiaries of the program will be required to give something back to the community, either through training or investments in public infrastructure, according to the bill.

The Commonwealth Development Authority, the lead agency tasked to implement the program, shall determine beneficiaries based on impact of their businesses on local tourism market, financial risks involved in the investments, their location as well as their importance to CNMI’s entire economic program.