N Touch
Wednesday 16 January 2019
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Commentary

Sandals or laced-up boots?

REGINALD DUMAS

I HAVE A few comments and questions on the recently released October 2017 memorandum of understanding (MoU) between the Government and Sandals Resorts on the proposed Sandals and Beaches hotels in Tobago.

First, I was surprised to see that Sandals Resorts is incorporated in Panama. I had always assumed it was a Jamaican company, and I can only hope it isn’t affected by Panama’s somewhat less than lily-white financial reputation.

Second, the privileges accorded Sandals almost suggest that a new state is being created within the State of TT. For instance, the Government is to “extend applicable benefits… to be negotiated and agreed between the parties to ‘associated’ and/or ‘affiliated’ companies of Sandals and also to named non-resident consultants, contractors (etc) engaged by Sandals for all or any purposes relating to the operation, expansion… and maintenance of the resorts…” Is transfer mispricing thereby facilitated?

Also, Sandals “will have the option to extend the terms (of agreements entered into with the Government) for… 15 years (beyond) the initial 25…” I see no such option for the Government. Is there one? And if Sandals changes status from management company to “owner of the freehold to the (hotels),” it will enjoy “incentives and tax reliefs… no less favourable than those granted (in the MoU).” No ifs, no buts.

Further, while Sandals is to “give preference to the purchasing of domestically produced agricultural inputs where available,” those inputs must come “in adequate quantities and quality and at comparable prices external to (TT).”

Where quantities are concerned, the owner of a small Tobago restaurant told me the other day that he has never been able to obtain adequate local supplies for his establishment, a position supported by Tobago greengrocers, who must travel weekly to Trinidad (if a ferry is available) to purchase produce, much of which is itself imported.

As for quality, I have little doubt that Sandals’ “unique” standards will eliminate most that is locally grown, especially since the prices are, I’m told, already higher than those of the imported goods. Tobago agriculture, such as it is, does not stand to benefit in the short and medium terms. Is there a long-term hope? Third, Sandals will be granted any benefits given other hotels if such benefits are more favourable than those given to Sandals. That may sound reasonable, but what if the benefits granted Sandals are more attractive than those enjoyed by existing hotels? Do those hotels have the right to demand equal treatment? With what possible impact on our tax base?

Fourth, disquiet has been expressed over the clause that Sandals foreign staff can work for 30 days in TT without a work permit. But my understanding is that our Immigration Act already allows that facility, provided it’s used only once in a 12-month period. The relevant minister can, however, waive the requirement. Could the Immigration Division clarify?

Fifth, the TT taxpayer is to foot the bill for the construction (and opening ceremonies) of the hotels, which are to be “built to the specifications of Sandals.” In this guava season, when our debt-to-GDP ratio is in alarming territory, where is the money coming from? Are we to burden ourselves with even more debt?

Sixth, Sandals is, “at its sole discretion, (to) be the final determinant regarding the suitability for employment of all candidate employees (so that) the standards of the brands can be attained and maintained.” Whatever we as owners of the hotels think is immaterial. Yet the present lawsuit against Sandals for sexual assault of a female guest by one of its Bahamas employees, however isolated the alleged incident, has certainly lowered the “standard of the brand.”

Seventh, if the proposed resorts are all-inclusive, what about unhindered access to the beach for nationals and residents of TT, as now exists in our laws?

Eighth — and a most astounding provision — the Government “undertakes to stabilise the tax regime applicable to Sandals… in respect of its operations and in that respect undertakes that if (TT) enacts or otherwise introduces any new law or fiscal measure it will grant or cause to be granted an exemption or remission to Sandals… so as to cause the tax regime applicable to Sandals… as set out in this MOU and/or any subsequent agreements entered into… to remain stable.”

So the Government is committing itself, and future governments, to grant tax and fiscal favours to a private company! Is this the intent of the Income Tax Act, which (with or without parliamentary approval?) does permit tax remissions or refunds “if just and equitable to do so?” And how, constitutionally, can a sitting government bind a government to come?

I’m neither a “naysayer” nor “unpatriotic,” to use two of the Government’s favourite epithets. But this MoU, though legally non-binding, is deeply worrisome.

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