In a letter to Speaker Eliceo D. Cabrera, R-Saipan, and Rep. Froilan C. Tenorio, Covenant-Saipan, dated Nov. 4, 2011, Chamber president Doug Brennan said it is the expressed purpose of the Investment Incentive Act’s QC program to create jobs and increase the CNMI tax base.
“The government needs to get out of the business of creating jobs in government, with ideas like increasing taxes or retracting laws that provide incentive to invest,” Brennan said.
Industry, he added, creates jobs and businesses exist as a result of that creation which the government is supposed to foster.
Brennan said the CNMI government benefits from the QC program through the payroll tax on jobs created as a result of the temporary tax relief.
“It also indirectly receives taxes paid on business activity new industry creates through, for instance, gross receipts taxes on small service companies industry relies upon, and subsequent increased consumer spending,” Brennan said.
The investment incentive laws and QC programs are perfect spiral/spin-off examples of economic growth, he added.
The Chamber cites the success in 45 different countries utilizing investment incentive laws as stated in the “2000 Report on United Nations Conference on Trade and Development — Tax Incentives and Foreign Direct Investment — A Global Survey.” The survey was conducted by the international tax firm Deloitte & Touche LLP.
The Chamber is offering the survey report to the Legislature for its review.
Brennan said that according to the report foreign direct investment is increasingly being recognized as an important factor in the economic development of countries and more countries are striving to create a favorable and enabling climate to attract foreign investment as policy priority.
“Why should the CNMI be any different?” he asked.
He said the local economy “we see withering away was built on investment incentive laws and lower costs of doing business in the CNMI, and now is exactly the wrong time to repeal investment incentives in the CNMI.
He added, “As the cost of doing business in the CNMI continue to climb via increased payroll costs as wages rise, increased costs via accessing labor not currently available in the CNMI through the new federal…system and increased utility and overhead costs, every single incentive the CNMI can afford should be extended to companies willing to invest in the CNMI, which would create badly needed jobs.”
The Chamber has gone on record to state its belief that the Investment Incentive Act and the QC program are for industry start-ups and not for existing CNMI businesses.
“If the Legislature feels the Investment Incentive Act’s QC program has not performed as intended the Chamber believes they need to look at the QC’s administrators or amending the existing law, but not withdrawing the law itself,” Brennan said.
He said the House and Senate forwarded a flawed bill, H.B. 17-58, to “reform” the QC program.
“The Chamber would much prefer amending the Investment Incentive Act by working with all parties, rather than repealing the QC program,” Brennan added.
The Chamber at the same time is extending an invitation to Cabrera, Tenorio and the Commonwealth Development Authority, which oversees the QC program, to meet with the Chamber and discuss the merits and the original purpose of the investment incentive legislation.
Brennan said the utilization of the QC program and the CNMI Free Trade Zones, which he believes were never properly organized, are the best ways to entice new foreign investments, create new jobs in the private sector, and, in turn, “necessary public sector employment to provide public services to an economy on the mend.”
