CDA disputes ‘failure’ of QC program

The Commonwealth Development Authority describes the CNMI’s tax relief system as “most lenient and most liberal”, disputing a business group’s finding that there is something wrong with it, resulting in the failure to meet its intended goal to promote economic development in the past five years of its implementation.

“I beg to differ. I understand their mindset also. They want the maximum amount of benefits they could get. But I’d like to point out that compared to other QC-type programs in the U.S. Virgin Islands, in other countries such as the Philippines, Vietnam, to name a few; we are the most lenient, most liberal. They only give a 5-percent tax break. We offer up to 100 percent,” said CDA board chairman Tom Glenn Quitugua in an interview yesterday.

In a report released last week, the Strategic Economic Development Council said that in the first five years since its inception, the QC program only generated $2.6 million in fresh investments.

It said that of the nine applicants that were granted qualifying certificates, only four accepted the government’s terms and only one of them is non-retroactive.

The SEDC ad-hoc committee on QC program cited as among the reasons of QC’s failure to attract new investments the “wrong mindset or understanding” of the program by the administering agency itself, the CDA.

It said that CDA has “erroneous” understanding that it would erode the current tax base.

Quitugua said the CDA is very mindful of potential revenues but it “is cautious” when it comes to giving tax breaks.

“Tax dollars and or revenues could be balanced out. I believe we are running the most fair and equitable program that a government entity can enforce. As far as any failure to attract new business, it’s not the failure of QC program, not the failure of CDA. The QC program is not a fix-all,” said Quitugua.

He said the lack of new investments is a failure “of the entire community as a whole.”

“We have to educate everybody on how to attract other businesses other than QC,” he said.

He said the Legislature should enact laws that are not restrictive.

“Go for deregulation. There are other avenues. I don’t see failure here. Instead of pointing finger, we can work as a team,” said Quitugua.

CDA, he said, implements the QC program which is a creation of the Legislature.

The SEDC report said that in the past five years until April this year, there were three retroactive QC recipients: Tinian Dynasty, Hard Rock Café, and Tony Roma’s & Capricciosa, and one non-retroactive: Sand Castle Saipan.

Five companies were granted QCs but they chose not to accept them.

They were SPEC Spring Water, Inc. Hyatt Regency Saipan, Rota Resort & Country Club, Fiesta Resort Hotel & Spa, formerly Dai-Ichi Hotel Saipan, and Saipan World Resort in 2004.

World Resort gave up its 2004 QC but it re-applied this year and lately received its 10-year QC—$5.5 million worth of tax break for its $25.5 million expansion program.

The QC program, 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 program allows tax rebates of up to 100 percent for 25 years.