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.
During a subsequent parliamentary debate on the Investment Authority Amendment Bill of 2017, Antigua and Barbuda’s prime minister, Gaston Browne, addressed the issue of what he described as Sandals’ “malevolence” at some length.
He said that the government had to correct the inequity where Sandals should have been collecting 12.5 percent in the form of a guest tax, not paid by Sandals, but paid by guests who come to the country. He pointed out that, in all the other hotels in the country, the guests who come there have to pay that 12.5 percent.
However, Sandals, which had already been enjoying the across board tax concessions outlined in Part One, decided to approach the former United Progressive Party (UPP) administration and ask them to sign an illegal agreement.
“I want to emphasize: an illegal or unlawful agreement to discount 65 percent of that 12.5 percent. The former administration signed an agreement with Sandals, which they had no legal authority to do – the former UPP administration… we sought several legal opinions. One of the attorneys who gave us an opinion is Mr James Guthrie from the United Kingdom, a well-known Queen’s Counsel, who said to us that the agreement was illegal,” Browne said.
“But the agreement was not only illegal, it was morally reprehensible because if the employees are significant stakeholders and the government is a significant stakeholder then we ought to share equitably in the economic gains of the hotel. So… even trust money that they were to collect and pass on to the government, they decided either they were not going to collect 65 percent or they held on to 65 percent of it. My suspicion is that they held on to 65 percent of it,” he continued.
Browne asked what would happen if Sandals were to open a hotel in the United States and held on to 65 percent of their guests’ tax.
“You know what would happen – the principals would go to go to jail,” he said.
“Are we supposed to sit back and do nothing and allow investors exploit our people and to rob the government of its rightful revenue? That will be more irresponsible! So we did a responsible thing. There was a big brouhaha about it and subsequently they agreed to pay. We gave them seven months in order to put a new regime in place in which they will have to collect the full 12.5 percent and to pay it over to the government,” he noted.
Browne pointed out that his government did not pursue Sandals for back taxes but, in the interest of peace and unity and to ensure a good investment culture in the country, wrote off $101 million in unpaid taxes.
Browne also revealed that, not only had Sandals escaped over $100 million in unpaid taxes, they were also manipulating their obligation to pay social security contributions in respect of their employees by classifying certain workers as independent contractors so that they did not have to pay the payroll taxes.
When the Social Security Department launched an audit of Sandals books, the owner of the resort group, Gordon ‘Butch’ Stewart, threatened to close down the hotel.
Once again, in the interest of peace, Browne said he asked the director of Social Security to call off the audit.
Apparently, even this did not satisfy Stewart and in July 2017 Sandals closed down its Antigua property “for maintenance purposes” without forewarning to the government or the employees of Sandals and left guests who booked their vacations without a destination and with no meaningful explanation.
This retributive action by Sandals prompted the introduction and passage of the Investment Authority Amendment Bill by Parliament, which was designed to prevent any similar arbitrary and unilateral action by hotel operators in the future.
The bill requires a proprietor of a hotel with a three percent or more of the total room occupancy or stock in Antigua and Barbuda to give 60 days’ notice in writing to the government and stakeholders such as trade unions, hotel management and staff if they intend to close down temporarily for two months or more in any given year or to suspend business activities for a period of two months or more for reasons other than development to expand low occupancy or force majeure, which includes manmade disasters.
The notice period is to be followed by consultation between the proprietor and the stakeholders for the purpose of discussing the issues arising out of the temporary close down.
The bill authorizes the minister responsible to suspend any concessions granted to a hotel under the Investment Authority Act or any other enactment if a proprietor fails to comply with the provision of the new section.
“The reason this is in here is because the Sandals management had the audacity of telling my cabinet that they don’t have to talk to us because it is their property… When we see these threats we have an obligation to mitigate against them and that is why we are here today, to mitigate against those threats,” Browne explained.
Browne emphasised that there had to be some adjustments going forward in the interest of workers, pointing out that the senior management of Sandals are all expatriates and, out of 33 individuals in middle management, just two are Antiguans.
“Where you get some parity is at the lower end, with the gardeners, butlers, maids, waitresses, etc. – the parity is almost 1:1,” he noted.
“We have individuals who are studying hotel management, accounting and they can’t get any work here. What is happening, after we spend all these millions of dollars educating them, tens of millions collectively over maybe a three or four year period, they come back to the country, they can’t find any work and then they have to leave. It is an issue of underdevelopment, a brain drain in which the hotels that ordinarily should be helping to create space for our graduates are filling those positions that expatriates to the detriment of our people,” Browne continued.
“I am saying now that as a government we have to address these issues… This is about the development of the country,” he said, pointing out that the current business model is exploitive and it is not exclusive to Antigua and Barbuda.
“I will be raising this issue with CARICOM because in fact one not too smart prime minister said to me recently, ‘I don’t care what they say, I have my Sandals.’ In other words, it doesn’t matter that his people are exploited, all he wants to know is he has a Sandals in his country. I’m saying here this argument is not exclusive to Antigua and Barbuda. It has to become a regional discussion about protecting the Caribbean people from exploitation,” Browne emphasised, adding that, if it is not a collective effort among CARICOM countries, then there is going to be underdevelopment in certain countries.
He said it has to become an urgent regional discussion to ensure that there is some level of harmonization of investments, so that an investor cannot come to Antigua and Barbuda behave like a bandit, hold a gun to our heads and say, if you don’t give me this, I lock down my hotel or, if you don’t give me these concessions, I take my hotel to another country. There has to be some level of harmonization of concessions to prevent exploitation within the region.
“I expect that what we are doing here in Antigua and Barbuda that the other countries will follow. I want Antiguans and Barbudans… to understand that this issue has regional implications, not just about Antigua and Barbuda,” Browne said.