House calls for audit on economic impact of QC program tax breaks

The House of Representatives yesterday adopted a resolution calling for an audit of the economic impact of the tax breaks issued to investors under the qualifying certificate program.

The resolution, sponsored by Rep. Ray N. Yumul, also urges the Office of the Public Auditor to assess the potential impact of approving pending applications or granting additional benefits to existing QC beneficiaries.

The resolution comes in the heels of a request from the House of Representatives for the Commonwealth Development Authority not to grant additional tax breaks to Saipan LauLau Development Inc., which recently scaled down its formerly $68.8 million construction project at LaoLao Bay Golf Resort.

Yumul, who had also penned the previous resolution, said it is necessary to find out “whether the QC program is working or not.”

Several lawmakers raised concern about it. Rep. Tina Sablan, for one, said an audit may be unnecessary as CDA issued an impact report on the QC program only a year ago. She added that OPA is currently short-staffed and may not have the resources to perform the requested audit.

Rep. Diego Benavente echoed Sablan’s statement, adding that OPA may not be the appropriate agency to study the multiplier effects of the QC program.

For his part, Rep. Heinz Hofschneider said the House should be careful not to send a message of “witch hunting” to investors, especially those who have availed of the incentive program.

Despite these concerns, the resolution was adopted.

According to a report that CDA released in November 2007, the QC program has attracted 11 companies, produced immediate benefits of $28.12 million from capital expenditures, and generated a total of $100.59 million in taxes, local purchases, utility payments, and other community contributions over the seven years the program has been in place.

The report did not indicate the amount of taxes waived for QC beneficiaries under the program.

Since the report was issued, CDA has approved at least one more qualifying certificate. In August 2008, CDA approved a plan to provide up to $18 million in tax relief for the LaoLao Bay Golf Resort’s $68.8 million golf hotel, a complex with condominium-style apartments for golf tourists.

The QC program was established on Dec. 1, 2000. Under the program, tax benefits are given to entice businesses to put up new investments in the CNMI or to assist existing investors in expanding their operations.