By Angus Jones
There’s a saying that ‘you can fool some of the people some of the time, but you can’t fool all of the people all of the time.’
As this impasse drags on between Sandals and the Government of Antigua led by Prime Gaston Browne, I am finding more and more inconsistencies in what the Prime Minister has been saying.
Mr. Browne’s position is that the previous administration had no authority to grant Sandals relief from the Antigua and Barbuda Sales Tax (ABST), and that this was illegal. I am still trying to wrap my mind around that, because I’ve looked at the ABST legislation online and I can’t find anything that specifically rules out such a thing occurring. In fact, a concession agreement is a negotiated contract between a company and a government that gives the company the right to operate a specific business within the government’s jurisdiction, subject to certain conditions. This makes me wonder if the Prime Minister does not understand, or is intentionally misunderstanding how concessions work.
There are requirements on both sides and as far as I can tell Sandals has delivered on their side of the bargain by the development of the Mediterranean Village at Dickenson Bay. And contrary to putting the political spin on it of the concession being granted by the UPP, the irony is that the concession was originally granted in 2000, under Lester Bird …and the former UPP government (unlike what Gaston Browne is now doing) actually sought to honour the promise that the Antigua Labour Party had given Sandals by offering them relief from the ABST since the concessions still had a number of years to run.
So actually what Mr. Gaston Browne is doing is breaking a promise given by his own party, to an investor that has been in the country for over 25 years….or so it would seem.
But I have to ask, when did ‘concession’ become such a bad word? It’s a legitimate tool for leveling the playing field and attracting investment. A government should be complimented for successfully using concessions to attract investment. The real issue is when you have the investor, how do you build on that relationship. A smart government will build on the concessions to get capacity in other areas; employment, linkages, marketing etc. Concessions allow an investor to deepen their investment and can be a good and useful strategy. The question is what has the Gaston Browne government done to support the productive and agricultural sector etc. to take advantage of what Sandals and the tourism sector offers.
If what Adam Stewart says is true, then the government of Antigua received more than double the investment that was agreed to when it asked Sandals to build more rooms and facilities in 2000. So from the outside, it looks a bit unfair that you had a deal, and then when the other party delivers you say well, ‘you know what, I don’t need to honour my end of the bargain.’
Then there is the issue of the EC$100 million that the Prime Minister says was written off. As far as I understand the ABST is a VAT or Value Added Tax. VAT is a consumption tax levied on products at the point of sale, which it then remits to the government. Therefore it means that whatever the figure was that Sandals received under the concession, then this had to be charged in the price of the all-inclusive package, as I believe I heard Adam Stewart, the company’s CEO say during another radio interview. If that’s the case, then there can be no ‘withholding’ of any of the tax by Sandals as the Prime Minister has suggested, so I can understand why the people are getting upset when he says the government wrote off $100M. He is implying a tax on top of the tax, which is double-dipping and that is a definite no-no! The fact is they would have charged 100% of whatever figure was quoted under the concession.
I read recently that one of the dangers facing the Caribbean is that the developed nations see us as a third world region incapable of transacting first world business, and one of the major factors that contributes to this is governments not being able to honour host country agreements with investors. If this is the case, Prime Minister Browne, for all his bravado, is displaying the stereotypical behaviour of the third world leader, a warning sign to any potential investor who may want to put down some big bucks in Antigua. This is old-school, flawed and radical politics because essentially Prime Minister Browne is trying to kill the golden goose.
In fact with no major new projects breaking ground in Antigua in recent years Prime Minister Browne should know first-hand how hard it is becoming for Caribbean economies to attract investment, and with correspondent banks re-risking (which Mr. Browne himself has spoken about) there will be added pressures on the investment policies of government. Don’t doubt for a moment that the investment community is not watching, and they will simply say that Antigua is too political and place their money elsewhere.
That means there is a risk that investment and development will go to Barbados, Saint Lucia, St. Vincent and Trinidad and Tobago etc., where there appears to be a more stable political climate. I daresay it’s probably a good thing Sandals is an old investor in Antigua, because if they were a potential investor they may very well have been scared off. But then again, maybe this will cause the company to rethink deepening its investment; there was talk of a Beaches right? You wonder now why that never got underway.
Furthermore it’s a bit contradictory that the Prime Minister would knock concessions, yet use the same strategy to give Yida tax breaks for the Guiana Island development to attract partners. In fact during that same radio interview with the Observer he mentioned, in a rather angry tone of voice, that he hopes Sandals does not come with any more demands for concessions, or something along those lines. I don’t know that any company can ‘demand’ anything – the concessions are negotiated. Is he saying that he is unwilling to entertain negotiations with an investor? Well, what a statement that is!
The Prime Minister may very well have gained some political points among his followers portraying the courageous knight standing up to the mighty dragon, but let’s remember folks, this is no fairy tale. Prime Minister Browne may have no problem being a big fish in a small bowl; however he must understand that he is not an emperor who will rule forever. His position is finite and eventually someone from another party, or even his very own will hold the office of Prime Minister, and he has to be careful of how he holds that office in trust, because burning rather than building bridges, can be very dangerous in today’s global village.
(The expressed in this article are those of the writer Angus Jones. They do not reflect the views of Caribbean News Service).