THE fishing industry says it is “astounded” by the Falkland Islands Government's decision to approve a 50% rise in toothfish and calamari fishery fees.
FIG claims more extensive analysis and financial modelling of the fishery has been undertaken which considered the profitability of the sector, planned investments and the contribution to corporation tax.
The industry, however says it is no more than a raid of reserves and undermines the future of successful enterprises.
Falkland Islands Fishing Companies Association (FIFCA) Executive Secretary James Bates said: “The decision is not supported by any objective analysis and amounts to no more than Government seeing increased strength in the target companies' balance sheets in the past three years and deciding to increase the fee burden on them.”
Chair of the Chamber of Commerce Mike Summers has written to MLAs expressing concern that this represents "not just a shortfall in obligations to properly consult, [more widely amongst those potentially affected, not just the fishing industry] but signals a significant change in Government policy and attitude towards business...”
The decision represents an estimated £3.9 million per annum additional income to the FIG.
A statement from the government said: “MLAs have decided that having rebased the fees this year, there will be no increase in calamari and toothfish ITQ fees for the remainder of this Assembly.”
Fisheries portfolio holder MLA Teslyn Barkman said that the sector had made it clear that companies needed to operate profitably, whilst investing in the growth of the fisheries sector including fleet renewal.
“We recognise that the profitability of the sector will need to be closely monitored. Fees are reviewed annually and can be reduced if necessary.”
'Squeaky bum time'
Tom Blake of RBC Ltd told Penguin News: “With a new vessel just two years into operation and another one under construction, if it wasn’t already squeaky-bum time it certainly is now. That this increase is made when FIG has been making significant surpluses in recent years (and is forecasting another surplus of £11m for this financial year), largely due to taxation paid by fishing companies, makes it seem like an entirely unnecessary punishment. It is hugely alienating and disenchanting.”
According to Mr Bates the decision will increase costs to the industry by £4 million per annum.
He said the industry was astounded and extremely concerned at the decision which will have implications throughout the sector and in the wider economic climate.
He commented: “Falklands Fishing companies pay some of the highest fees in the world. Independently prepared forecasts show that with taxation the Government proportion of sector profit will be well over 40%, without this additional fee.
“For much of the past ten years returns have been insufficient to support vessel renewal, but as soon as performance improved the companies involved began programmes of vessel replacement, a typical investment in a vessel is approximately 20 million euros.” Mr Bates said the decision would reduce the level of future returns and undermine investor confidence, "and will make raising capital all the more difficult for companies in the sector."
Damages Falklands reputation
He said it "damages the Falkland Islands’ reputation for fiscal stability which has been an important factor for the business community and cuts across the Island Plan provisions.
"The implications of this change in Government’s fiscal approach, the realisation that Government feel free to raid the reserves and undermine the future of successful enterprises, particularly at a time of Global and Brexit uncertainty, will be noted by all in business in the Falkland Islands to the detriment of our economy overall."
Chamber writes to MLAs
In a letter to MLAs from the Chair of the Chamber of Commerce, Mike Summers, he outlines recent discussions between the Chamber Board and MLAs Pollard and Bragger in relation to how the Chamber interacts with MLAs and Government and how this might be developed positively, adding, "This kind of open discussion can only lead to more cohesive policy making, and better awareness of industry requirements."
He said: "The Chamber expressed concern in the meeting that there had recently been instances where there had been very little interaction with the business community on some key Government decisions, each of which have very significant impact on the business community. These include the announcement on Broadband financial support, changes to established practice on immigration processes, and the introduction of public registers of beneficial ownership of companies. Not specifically mentioned in the meeting, but of equal concern, are the proposals to extract significant additional sums of money from parts of the fishing industry."
In relation to the latter he said the proposal to extract very substantial sums of additional money from the fishing industry, "through a radical change to long established licence fee policy and practice, without the production of a considered policy analysis, is particularly concerning."
The Chamber feels this represents "not just a shortfall in obligations to properly consult, but signals a significant change in Government policy and attitude towards business, that is not reflected in the Islands Plan, and was not included in any Member’s political manifesto."
Mr Summers said that the Government wishing to increase operational and capital spending, within its means was entirely legitimate. "But to increase what is discretional expenditure to such an extent that the Government feels obliged to raid the cash reserves of businesses is a very different matter, and one that causes significant concern for all sectors."
Mr Summers took the philosophy further saying: "If the political thinking of the Government is that it is free at any time to extract money from any area of business that might currently be enjoying short term income benefits, to fund its expenditure proposals, that will be very worrying for all. Both Agriculture and Tourism are currently enjoying good spells, though that will not always be the case. Can they also expect to be subject to this somewhat cavalier and unpredictable policy? What is the Hydrocarbons industry and its contractors to make of this type of approach to taxation and licence fee policy?"
He also pointed out that the profitability of the fishing industry drives much of the expenditure in economy and impact on the fishing industry would be felt on smaller businesses and of course charities that benefit from the industry.
He urged Members to reconsider the "reputational damage to Government that this policy will cause, and its potential long-term consequences."
There is also to be a 20% reduction in skate fees, and a 5% reduction in the restricted finfish fees.