Cabrera, R-Saipan, and Tenorio, Covenant-Saipan, were responding to Saipan Chamber of Commerce president Douglas A. Brennan who expressed opposition to the bills that will scrap the program.
Cabrera’s House Bill 17-216 seeks to suspend QC while Tenorio’s H.B. 17-168 will repeal it.
Brennan told the two lawmakers that discontinuing investment incentives decreases potential investments and job creation.
Cabrera and Tenorio in their joint letter to Brennan said they disagree.
They told him the QC program only benefited certain existing businesses.
They noted that the major reasons to attract investment to the commonwealth are to provide jobs for locals and to broaden the commonwealth’s tax base with increased government revenue. The QC program, Cabrera and Tenorio said, “has failed in both respects.”
Easily more than 90 percent of the workforce of companies holding QCs consists of nonresident workers, they said.
The CNMI, they added, “should not give up tax revenues to support the economies of the Philippines, China and elsewhere.”
They said there might be some value to a program that provides good, well-paying private sector jobs for locals but that is not what the CNMI has with its QC program.
“Instead of adding our tax revenues, the QC program results in a net of loss of public funds. The qualifying companies use government services while paying nearly nothing for them. We need all the public revenues we can generate in these desperate times, and we cannot increase those revenues if we continue to exempt companies from paying taxes. The small amount of taxes paid by their foreign workers cannot make up for the companies’ free ride on the backs of our local taxpayers,” Cabrera and Tenorio said.
They said if foreign companies don’t want to invest here without a QC, “we don’t need them. We already provide a significant incentive in the form of tax rebates. If they want to make money in the CNMI, they need to pay their fair share.”
In an interview on Monday, Tenorio said the next big investment on Saipan will be the casino industry.
“We should note that the bill currently under consideration by the Legislature to permit casinos on Saipan will make them ineligible for QCs. We strongly favor that legislation and that particular provision. Our position on the bill is consistent with our sponsorship of House Bill 17-168 and House Bill 17-216,” Tenorio and Cabrera said in their letter.
In an interview, the former governor said “there is no reason for [the QC program] to exist any longer.”
He added, “For that matter the program has been improperly administered from the very beginning. Many businesses were granted QCs without meeting the qualifications required by law.”
Tenorio said the Commonwealth Development Authority should have been recommending mostly short-term certificates instead of routinely granting tax breaks for 20 to 25 years.
But Cabrera and Tenorio assured Brennan that neither H.B. 17-168 nor H.B. 17-216 would have any effect on existing QCs.
They said companies holding such certificates would still receive all benefits to which they are entitled for their entire term, provided they continue to comply with the conditions of the program.
“If the time ever comes that we might want such a program again, it would have to be significantly different to benefit our people and be worthy of their support,” they told Brennan.
In a separate interview, yesterday CDA economic development analyst Carline B. Sablan said not all the 15 companies on their list have active QCs.
One was revoked, one did not accept the QC because it did not like the condition, two surrendered their QC’s after transferring management to new owners, and three failed to proceed with the investment after being issued QC’s.
Sablan said the companies that have active QC’s right now have been complying with conditions which include the percentage requirement in hiring locals. CDA, she added, closely monitors these companies as certificate of compliance is awarded to them annually.
Sablan also pointed out that since some of those companies were never issued QC’s, it is not right to say the program is a failure. It can be considered a failure only if a QC is awarded but the investor never complied with the conditions and gets away with it, she added.
