By Caribbean News Now contributor
ST JOHN’S, Antigua — On December 5, 2016, the government of Antigua and Barbuda and various Sandals Resorts entities signed a “Deed of Release and Settlement of Claim” under which the government agreed to accept the payment of EC$1 in full satisfaction of unpaid Antigua and Barbuda sales tax (ABST) totaling EC$101,424,448.54 (US$37.5 million) up to December 31, 2016.
A recent article in the Jamaica Observer (owned and controlled by Gordon ‘Butch’ Stewart, also the owner of Sandals), in an attempt to justify claimed economic benefit for Antigua and Barbuda, set out a lengthy, unsubstantiated list of local purchases by or for the resort.
What the article in question failed to mention was that any such purchases have effectively been paid for and more — not by Sandals, but by the people of Antigua and Barbuda themselves out of the $101 million in ABST that should have been paid by Sandals but was not.
Sandals has now agreed to pay ABST at the full statutory rate as from January 1, 2017 and waived from that date any right that they may have had to a discounted rate of ABST under any prior arrangement or agreement with the previous government.
Notwithstanding its agreement to the terms of the deed of release and settlement of claim, in apparent retribution Sandals closed down its Antigua property for several months without notice, ostensibly to implement previously unannounced repairs and renovation.
This closure prompted the government to introduce and pass in Parliament the Investment Authority Amendment Bill of 2017, which was designed to prevent a similar repeat occurrence, not just by Sandals but by any significant resort operator seeking to impact or manipulate the Antigua and Barbuda economy in like manner.
During the parliamentary debate on the Bill, Antigua and Barbuda’s prime minister, Gaston Browne, addressed the Sandals issue at some length, as part of a broad discussion about the hotel industry, which contributes some 17 percent of the country’s GDP.
“Are we going to allow the tourism industry to become an extractive industry? One in which workers are exploited, one in which government income is manipulated? Or are we seeking to have a stakeholder relationship in which all of us as stakeholders in industry will benefit equitably from its gains?” Browne asked, adding, “We can’t have a situation in which workers in this country are considered to be mere commodities for exploitation.”
He referred to the economic consequences when a hotel takes the decision to put 700 people out of work.
“Do you understand the effect on the living standards of these people? When you put a man out of work for seven months, how is he going to live, how is he going to take care of his family? Those individuals at the lower echelons of the industry don’t have the money to save; they’re living hand to mouth. The truth is not only are they living from paycheck to paycheck the money is so small they cannot even meet the obligations. When you deprive them of those checks for five months how are they going to survive? Those who have mortgages how are they going to pay the mortgages? Those who have can loans how are they going to meet the obligations? Those who have school fees how are they going to pay the school fees?” he asked.
“Unfortunately Sandals has taken a very myopic view about its operations. It will appear as though the principals of Sandals believe that they are the only stakeholders in this business,” Browne said, noting that that the closure of Sandals for three months, potentially five months “is an act of hostility”.
“It is an act designed to extract additional concessions from the government of Antigua and Barbuda. It is a form of retaliation for the fact that … Sandals either failed to collect 65 percent of the guests’ tax or they held on to 65 percent of it,” he said.
Browne noted that Sandals had claimed they never collected the tax in question, but asked, “If you didn’t collect it why are you paying 35 percent of it?”
In common with many other Caribbean countries and territories, when Sandals first came to Antigua and Barbuda, they extracted ten years of tax and import duty concessions.
“They paid not one cent in taxes on anything that imported into the country. No building materials, no capital equipment, no machinery, no furnishing, no fixtures, nothing,” Browne noted, pointing out, “They are still enjoying those concessions up to today, those have not been revoked.”
He also noted that Sandals also enjoy exemptions from withholding taxes, from corporation taxes so that whatever they gross in the form of profit is net, government gets nothing.
“Invariably those profits do not stay in this economy for further expansion of the business; almost invariably it is repatriated to expansion in other countries… generally speaking these profits are repatriated to support the expansion of Sandals in other counties.
“What we found was that the ten years was not enough, they then demanded 15 years, and they got it. Fifteen years tax free, free of all withholding taxes, free of taxes on everything they import into the country, barring food and beverage. Well, they had food and beverage at one point and I’m coming to that. So everything duty free, tax free. Then you had a situation in 2004 they demanded more taxes, they said 15 years is not enough, they said they wanted 25 years. They got it.
“Then in 2014 they came again said you know what, this ten years that would have elapsed from our concessions we want a renewal for another 25 years and they got it. In other words, if you look at the last ten years, they would have gotten 35 years tax free concessions [and] even though they have all these concessions they continue to manipulate the accounts.
“They have their parent company, Sandals International; a company that apparently does all of the bookings. What they do is that they will cream off the top of all the bookings $10 million … $20 million and then they will remit probably about $50 million for the two properties here. They will report the $50 million revenue from which they will deduct the expenses and then would have an overall profit of maybe about $7 million or $9 million. But you have to understand that the moneys that they creamed off the top that is going straight to profit,” Browne explained.
To be continued…