CDA comes to the defense of incentive program

The Commonwealth Development Authority is questioning the basis of two pending House bills that seek to amend the qualifying certificate program.

During a meeting Friday, economic development analyst Carline Sablan reported to the board that they have received copies of House Bill 17-168 and House Bill 17-216.

HB 17-168, introduced by Rep. Froilan Tenorio, calls for the repeal of the QC program, except for its administrative and enforcement provisions, since the CNMI “can no longer afford the loss of financial resources” by continuing the program.

HB 17-216, introduced by House Speaker Eli Cabrera, seeks to suspend the QC program for new applicants for three years, except for the administrative and enforcement provisions of the program, which will remain in effect.

“It seems like the biggest concern they [Legislature[ have is that the program is supposed to create jobs and expand existing tax base. I guess they don’t see that it has done that,” Sablan told the board.

Although CDA has yet to submit its comments regarding both bills, Sablan said that CDA staff went to the Legislature in March to explain to lawmakers how the agency administers the program.

The qualifying certificate program, created by the Investment Incentive Act or Public Law 12-32, offers tax incentives to new investors to promote economic development in the CNMI.

To show the cost and benefits of the program, Sablan said they need annual figures from the Division of Revenue and Taxation. However, despite numerous requests in writing, attempts to make appointments, and follow up phone calls, Sablan said that they have yet to hear from the division.

“We need these numbers to show the impact of this program and without it, I don’t know how else we can demonstrate that this program has been, in fact, beneficial to our economy,” added Sablan.

Executive director Manuel Sablan pointed out that the issue is whether investors will come in without the incentives provided under the QC program. “Obviously, there are other opportunities elsewhere where they can actually put their money. So everybody is trying to attract new investment. The purpose of the QC is to attract new investment, preferably foreign capital,” he explained.

Manuel Sablan emphasized that the QC program does not deteriorate the tax base since it does not provide relief to existing companies. Instead, it creates multiplier effects such as providing more job opportunities.

“You don’t lose anything with respect to any tax revenue because you don’t have anything. But by attracting these new companies to come in and invest and they generate that, it creates a multiplier,” he said.

Moreover, Manuel Sablan said the QC program requires “public benefit contribution” from its beneficiaries, thereby generating positive social impact on the islands.

“I don’t know how best I can explain this,” said Manuel Sablan, adding that they will continue to find ways to advance the QC program and maintain its stability.

For his part, loan manager Oscar Camacho said, “I think it’s the difficulty of trying to figure out revenue-generating measures and the easiest way is to beat on the QC because they ‘hear’ that it’s a failure because [they don’t see the whole picture].”

Board member Marcie Tomokane urged the CDA administration to continue its efforts to bring in Revenue & Taxation “to give you the other side of the data, to give you a global picture of the program.”

“To me, the QC is a good program for new investment, for new investors that were never here in the first place. What have you got to lose? As a matter of fact, you gain by having them bring in their money, build infrastructure, hire employees. Those are the things that the Legislature probably don’t see or don’t hear or probably don’t know,” she added.