Legislature works on incentive package

To set an ambitious plan in motion, a proposed egislation will provide tax relief and other incentive package for foreign investors on a proposed free trade zone in the Northern Marianas, including up to 100 percent rebate in corporate and personal income.

House Speaker Diego T. Benavente filed the administration-sponsored bill seen as an important component to an earlier measure establishing special economic sites on the island as part of the campaign to revive the local economy.

Both bills are now under review by the House committees on Commerce and Tourism as well as Ways and Means who have been tasked to look into the proposal prior to any action by the Legislature.

In particular, the latest measure as provided under House Bill 11-396 will seek amendments to the current tax structure of the commonwealth to suit the intent of HB 11-389 which sets up the first-ever free trade zone on the island.

Among the exemptions in the package, which are to be granted for up to 20 years to businesses within the area, are:

– Gross revenue tax, except for construction activities and retail/wholesale sales from outside businesses;

– Excise tax on capital equipment, machinery, spare parts and other items as brought into the zone.

Payment of this tax will also be scrapped for raw materials and other goods used for products manufactured within the zone, excepting those consumable supplies used in the daily operations, construction supplies or if they enter through the local customs office.

The finance secretary may also exempt excise tax for goods and other domestic articles which have already been levied by the CNMI government. He may also prescribe regulations to exempt any other goods, commodities, merchandise or resources from taxation.

– Developer’s tax on the construction of commercial buildings and infrastructure located within the zone.

Although income and corporate taxes will be assessed from its companies and their employees as set forth under the local tax system or the NMTIT, they will receive rebate on an amount that range from one percent to 100 percent of the money they pay to the government for a period of up to 20 years.

An administrative body to be created by the government solely for the free trade zone shall determine the rebate “at a level that is commensurate with the economic benefit” to the CNMI.

The bill stemmed from House Bill 11-389, introduced last month also by Benavente, which sets the mechanism to create free trade zones in the CNMI as the centerpiece of the plan by the Economic Recovery and Revitalization Task Force to stir business activities on the island.

The Northern Marianas is reeling from its worst crisis in half a century following the fallout of the prolonged recession in Asia, its main tourism market and source of investments.

A similar bill, sponsored by Rep. Heinz Hofschneider, is also seeking tax breaks and other incentives for business owners in what appears to be twin measures both aiming at diversifying the CNMI’s economic base beyond tourism and garment industries.