QUALIFYING TAX CERTIFICATE PROGRAM HANMI frowns at strict local ownership requirement

While expressing support to the Qualifying Tax Certificate Program, the Hotel Association of Northern Mariana Islands has cautioned the Legislature against imposing strict requirements on local ownership and employment.

Ron Sablan, president of HANMI, commended the proposed measure saying it would encourage economic growth without requiring the Commonwealth to enter into concessions or “sweetheart” deals with businesses to convince them to invest in the CNMI.

At the same time, it lowers the cost of doing business in the CNMI during the first few years of operation by lowering the investors’ potential taxes, he said.

“Even with a business paying reduced taxes, by encouraging new business, the tax base will actually increase because these new businesses would not have invested in the CNMI if not for the incentives contained in this bill,” Sablan added.

However, he said the proposed measure should recognize the difficulties that many business experience in employing a significant number of local workers.

Sablan said it would be difficult, if not impossible for many employers to meet the provision in the bill, which requires that at least 40 percent of a company’s non-managerial personnel come from the local labor pool.

He noted that majority of employees in the hotel are ground-keepers, maids and kitchen staff, positions which are traditionally not attractive to local workers.

Despite their efforts to hire a significant number of local residents for manual jobs, HANMI members have been unsuccessful. “An exemption should be made for businesses that make good faith efforts to recruit CNMI residents, but are unsuccessful,” said Sablan.

Patterned after Guam’s policy, the bill would give preference to investors with a 51 percent stake from an owner who is both CNMI resident and U.S. citizen.

However, Sablan said this condition will not entice multi-national hotel chains because it’s impractical.

“Hotels from these chains are sought after by many jurisdictions. For this bill to be a true lure for investment in the CNMI, the restrictions/conditions that will be placed upon an investor must be kept at a minimum and must be conditions that the investor believes he can comply with,” he said.

At the same time, the definition of “hotel” in the bill excludes locally-owned establishments which are smaller and would be unable to benefit from the provision of this bill if they want to expand their business. The measure only covers hotels with 200 rooms or more.

Aside from HANMI, several government agencies called for refinement of the bill, citing several provisions that should be amended to make them consistent with existing laws as well as to the adapt to the present economic situation.