CDA defends QC program

The Commonwealth Development Authority maintains that it is doing what is prudent for the CNMI in relation to its handling of the tax incentive program for businesses.

Saipan Chamber of Commerce outgoing president Alex Sablan earlier criticized the government’s existing qualifying program, saying that it only generated $2 million in fresh investments since its inception five years ago.

“Regardless of the supposed amount that he is reporting to the general public, keep in mind that CDA’s responsibility is to be prudent with the taxes and benefits based on investments,” said CDA board chair Tom Glenn Quitugua.

Quitugua said CDA is pro-business “but we are also mindful not to give away fragile and limited resources of the Commonwealth.”

Sablan earlier said that the small amount of direct investments received through the program indicates that the package is not attractive enough to lure in new investors. Sablan called on the government to repackage its incentive programs.

Quitugua said that the QC program gives tax benefits “accordingly.”

“Of course, businesses want 100 percent benefits but we have to be mindful of our resources. We have a balanced program,” he said.

The QC program, first enacted in December 2000, was set up to provide various tax incentives for investors to build, expand, and operate commercial projects in the CNMI.

The law, enacted during the 12th Legislature, has undergone two amendments “to address the needs of existing businesses in the CNMI.”

The original law sought to entice new investments, but it was amended to help existing businesses keep up with new competitors. It was later amended to offer tax break incentives for businesses that have weathered the economic crisis since 1999.

The amendments also lowered the minimum investment amount for hotel or condominium expansion, removed the discretionary authority for the governor to establish terms and conditions in approving a QC, and allowed rebates of taxes of up to 100 percent for 25 years, rather than three years.

The first company to qualify for the program was SandCastle-Saipan in 2002. The business reportedly brought in $2 million in fresh investments.

Other recipients are Hard Rock Café, Rota Resort, and the Tinian Dynasty Hotel and Casino, which qualified under the “rollback provision” of the law. Tax incentives under the QC program were also granted to existing businesses such as Tony Roma’s and Capricciosa.

Recently, the CDA recommended a 10-year tax relief for Saipan World Resort Hotel for its $25 million expansion program. This is pending final approval by the governor.

This week, the CDA recommended the granting of a 10-year tax relief for a new $2 million proposed call center on Saipan.

The QC program 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.