CDA: QC still good for CNMI

Amid doubts on the effectiveness of the CNMI’s qualifying certificate program, the Commonwealth Development Authority board chair still believes that it boosts the attractiveness of the Commonwealth as an investment destination.

“It’s a viable incentive that’s available especially for new investors. It’s not the ultimate solution but it helps them settle down. The CDA is doing it best to encourage investors to come in,” said board chair Tom Glenn Quitugua.

He said the board met and discussed the issue lengthily during its meeting Thursday afternoon in preparation for a presentation at the House of Representatives next week.

The lower chamber recently adopted a resolution pushing for the evaluation of the government’s qualifying certificate program to determine its overall economic benefits to the Commonwealth. Lawmakers adopted House Resolution 14-137 asking the CDA and the Department of Finance to perform an evaluation of the QC program and to submit their respective findings to the House.

Authored by minority leader Arnold I. Palacios, the resolution said it is time to evaluate the business incentive program “to determine whether it provides an effective incentive to lure outside investment to the Commonwealth, determine and assess the fiscal and economic impact issued so far, and to consider necessary revisions to the Investment and Incentive Act of 2000.”

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

He said that while jobs are created with business expansion or activities, these employment opportunities do not go to the local workforce.

“What happens is that we bring in more foreign workers to get hired by businesses,” he said.

The QC program was set up to provide various tax incentives for investors to build, expand, and operate commercial projects in the CNMI.

It was subsequently amended to relax the criteria for the issuance of QC by lowering the minimum investment amount for hotel or condominium expansion, removing the discretionary authority for the governor to establish terms and conditions in approving a QC, and allowing rebates of taxes of up to 100 percent for 25 years.

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

The law, enacted during the 12th Legislature, has undergone at least three amendments “to address the needs of existing business in the CNMI.”

The CDA, 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 one was a tax break incentive for businesses that have weathered the economic crisis since 1999.

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

The program, in general 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.