Legislation granting tax breaks to new investments as well as present businesses with expansion plans is now before the office of Gov. Pedro P. Tenorio after the lower house yesterday accepted amendments made by the Senate.
Proponents urged the local chief executive to immediately act on the measure to pave the way for mostly foreign investors to open new businesses as well as to expand existing establishments.
HB 12-199, otherwise known as the “Investment Incentive Act,” seeks to provide tax relief to businesses under a qualifying certificate program administered by the Commonwealth Development Authority.
It is one of the key economic measures pushed by the House in a bid to boost the islands’ economy which has continued to be confronted by the decline in the local tourism industry, CNMI’s economic backbone.
House Floor Leader Oscar M. Babauta, the bill’s main sponsor, said the proposal would complement the free trade zone law recently signed by the governor to increase foreign investments in other potential industries.
“We need to expedite such legislation so that we can vigorously continue to entice investors,” he told reporters in an interview during a break in yesterday’s session.
“There are a few of them waiting on the line to proceed with their projects. This will eventually expedite the projects such as hotels and other vital tourism development,” added the lawmaker.
He called on Mr. Tenorio to fast-track review of the legislation and approve it. “I’m sure the governor is very cognizant of our economic conditions,” said Mr. Babauta.
Two new hotels, a peanut butter factory and a hi-tech software manufacturing firm may open shops in the CNMI once the government implements the qualifying certificate program, according to lawmakers.
HB 12-199, endorsed by the Saipan Chamber of Commerce and other business groups on the islands, was amended extensively by the Senate to reflect the broader scope of the business activities eligible under the program.
The House version was limited to hospitality and technology-related activities, but the Senate widened the intended beneficiaries to include any economic activity deemed in the best interest of the Commonwealth.
Under the program, incentives will include rebate of up to 100 percent of all taxes paid to the government for a period not to exceed 25 years or 50 percent tax abatement for the next 50 years.
But beneficiaries must comply with the conditions to be qualified, such as cap on the tax breaks; donations like improvement of public facilities or training program for local workers; and purchase of products or services from CNMI-licensed vendors.
New investments should have a minimum capital of $100,000 for Internet-related businesses or $10 million for a golf course to be qualified, while those expanding must infuse fresh funding half of those amount.
CDA will be tasked to implement the program and monitor compliance since the incentives will be subject to revocation for failure to live up to the terms and conditions.