Return to an equitable way of doing business in NMI

Editor’s Note: The following is the written testimony the author submitted to the Commonwealth Development Authority regarding the Qualifying Certificate application of Ocean Vista.

Joeten Enterprises, Inc. adamantly opposes Ocean Vista’s bid to secure 25 years of unfettered tax relief while the CNMI people, government, and business community continue to struggle. Just this week, developers from China presented that they would be applying for 25 years of tax abatement from the developer infrastructure tax, business gross revenue tax, alcohol and beverage tax, excise tax, and income tax. They claim that without the tax abatement their company would stand to lose $711,000 over the same period. They claim that the current supply of hotel rooms cannot meet the demand, but if that were the case, why would they anticipate a loss over a 25-year period? If these claims are true, then it is our belief that they have an extraordinarily poor business model.

We have itemized a list of our objections for the consideration of the committee. Our objections:

1. The Qualifying Certificate creates a competitive disadvantage to companies already doing business in the CNMI. In the case of the Ocean Vista, its restaurants and hotel will enjoy the luxury and benefit of not having to pay taxes while we see companies struggle to pay their share of taxes, where the only recourse is to either pay in installments or file for bankruptcy.

2. If Ocean Vista is allowed to operate in the CNMI tax-free, the tax burden in turn weighs heavily on the backs of our hardworking people. It is the rest of us, taxpaying individuals and businesses, who end up paying for public safety, public health, public infrastructure, etc. Over the past decade, the trend for government revenue has been a declining budget due to rapidly declining revenues. The QC program makes further cuts to several sources of direct revenue for up to 25 years, while government agencies scramble to increase the rate of current business fees and permits.

3. The QC program exempts companies from future tax hikes while every other company must continue to follow the law. At a time when government revenues remain unsteady and uncertain, lawmakers should consider their options to create or raise revenue. We believe that all companies operating legally in the CNMI should be treated equitably.

4. Their boasting of job creation does not consider our current labor supply issues. Currently, there is legitimate concern about how the CNMI will be able to fill positions for all planned development. This begs the question, “Who benefits from job creation?”

5. Ocean Vista has proposed to lease public land, which, in itself should be an incentive. It is common knowledge that the price per square meter leased in public lands is far below market value. It should be imperative to disclose the price being offered to Ocean Vista.

6. The continuity of the QC program continues to set a bad example for future investors. We understand that the intention of the QC program is to lure investors into the CNMI; however, we believe the program actually becomes a financial crutch for future investors in order to be competitive with companies already receiving QC tax relief. This scenario creates the potential for developing a separate business community that operates independently of CNMI tax laws.

Joeten is not anti-development. However, the people of the CNMI deserve fair and responsible development by quality investors. Ocean Vista says they will hire 148 people but are 148 jobs more important than the hundreds of thousands of dollars, perhaps millions, that would contribute to the government services that we all need and use? We believe that 25 years of operating tax-free in the name of job creation is far too excessive and grossly irresponsible. If Saipan is truly where Ocean Vista wants to invest its money, especially when they tout the other benefits Guam offers, then Ocean Vista would build their hotel on Saipan, with or without the QC. Let us return to a fair and equitable way to conduct business in the CNMI. Therefore, we urge this board to reject the Ocean Vista’s bid into the QC program.

Bo Palacios
Business Development Manager
JC Tenorio Enterprises