Teno OKs tax incentives

In a swift action to boost the economy, Gov. Pedro P. Tenorio on Friday signed a law granting tax breaks to new investments and existing businesses under a qualifying certificate program to be offered by the government.

He said Public Law 12-32 is a product of cooperative efforts between his administration, the Legislature and the business community in an effort to lift the islands’ sagging economy.

These tax incentives will make the CNMI “a more investor-friendly climate,” thus stimulating economic growth, the local chief executive said in signing the new law.

“The Commonwealth must pro-actively seek solutions to resolve our economic situation,” he added.

Mr. Tenorio underscored the importance of joint efforts by the government and the private sector in finding ways to address the three-year crisis, saying steps such as this are in the best of the island community.

“I am encouraged by this endeavor,” he said as he thanked all those who participated in crafting the program for their time and effort.

Known as the “Investment Incentive Act,” the legislation sponsored by House Floor Leader Oscar M. Babauta is the second significant economic measure the government has approved in the past two months.

It was signed into law four days after the House of Representatives accepted Senate amendments that widened scope of economic activities to be covered by the tax incentive program, aside from tourism and high technology industries.

Last September, Mr. Tenorio gave his approval to the ambitious plan to create free trade zones on the three main islands in a bid to diversify business activities beyond tourism and garment manufacturing.

High hopes

While that law has yet to bear fruit, island leaders have high hopes that PL 12-32 will have an immediate impact as many prospective investors are just awaiting the implementation of the qualifying certificate program to set up shops here.

Two new hotels, a peanut butter factory and a hi-tech software manufacturing firm have already expressed interest in investing in the CNMI once the program gets underway, according to lawmakers.

Existing businesses like the big hotels have also deferred final plans for expansion until the legislation is approved, they said.

Under the program, incentives 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, such for Internet-related businesses, or $10 million for a golf course for instance to be qualified, while those expanding must pump fresh funding half of those amount.

The Commonwealth Development Authority is 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 of the grant.

Qualified businesses are franchise restaurants, water parks, aquariums, cultural centers, theme parks, resorts hotels and condominiums, golf courses, convention centers, dinner theaters, special events like convention and sports, CNMI-based airlines, hi-tech manufacturing, Internet commerce, and other projects beneficial to the economy.