In what has become a heated legal and public discussion between the Antigua & Barbuda Government, Her Majesty’s Opposition and Sandals Resorts International, the latter has accused the former of making defamatory remarks and threatens legal actions.
Prime Minister Hon. Gaston Browne and his government has sought to strip Sandals Resorts in Antigua of an apparent lucrative tax break that allows the billion-dollar resort chain to charge a mere 35% of the island’s ABST to its guests.
The Prime Minister considers this a matter of grave concern and cites it as illegal and has begun steps to either have it revised or removed completely. Sandals on the other hand is challenging the Prime Minister’s approach to what it deems a legally binding agreement entered into with the previous government and one that not only affects the company’s operational standings but also cannot be rescinded at whim.
Below we reproduce the latest bit of correspondence from Sandals to the Antigua Government.
“By a letter from Marshall & Co, acting on behalf of your Government, a valid and binding Host Country Agreement which Sandals had with the Government of Antigua and Barbuda was unilaterally broken, without cause or notice. Sandals had dutifully kept its part of the bargain and it is noteworthy that no allegation was made in the Marshall & Co letter of any breach of the agreement on the part of Sandals.
“The Government of Antigua and Barbuda undoubtedly subscribes to the rule of law, and its action in unilaterally breaking a valid and binding agreement was, to our mind, a matter of national importance – indeed, in this case, it also has regional implications for it flies in the very face of the Treaty of Chaguaramas, which ironically was signed at the very hotel which is the subject of this dispute.
“The fact that the matter reached the attention of Her Majesty’s Opposition ought not to be a matter of concern. If investors cannot rely on investment commitments solemnly agreed then the public deserves to know. If indeed your Government’s action is lawful there ought to be no concern — politically or otherwise. We therefore do not see why you would attribute bad faith to anyone when we sought nothing more than transparency in a matter of government conduct. “Your fear that the integrity of Government could be damaged by a disclosure of a factual matter of public concern is puzzling.
“Honourable Prime Minister, you made inter alia, two very serious and highly defamatory allegations against Sandals.
“First you assert that Sandals is billing guests for 100 per cent of the Antigua and Barbuda Sales Tax (ABST) and paying over to the Government only 35 per cent of the amount collected. How could you, Honourable Prime Minister, possibly conceive that such a practice could ever occur? It is simply not true — it does not now and has never occurred. At Sandals Antigua, to which the Host Country Agreement applies, the all inclusive rate is fixed, taking into account the agreed Host Country ABST rate payable under the agreement.
“Where the guest incurs charges at the hotel which are not covered by the ‘all inclusive charge’ – for example spa services or special wine service – those charges are added to the bill and ABST charged at the applicable rate of 15 per cent. The full amount is paid over to the Government. In no circumstance did we operate a system of charging ABST at a higher rate and accounting to Government at a lower. The fact of the matter, Honourable Prime Minister, is that our computerised billing system is programmed to automatically generate invoices consistent with the billing arrangement described above.
“Secondly, Honourable Prime Minister our accounts at Sandals Antigua, as long we can remember, have been audited by internationally recognised accounting firms – first PricewaterhouseCoopers, and more recently by Grant Thornton International. How could they possibly account for the extra 65% of ABST that you have accused us of retaining for our benefit?
“Finally, Prime Minister, we are regularly audited by the Government’s own tax department and the practice you speak of could not have occurred in the face of such audits.
“Honourable Prime Minister, you might well have been misled into making the egregious error and accusation which you did by not realising that Grand Pineapple did not, under our ownership, enjoy any host country ABST fiscal benefits — not under the 2009 Agreement or the 2013 agreement.
“Our intention, as you know, was to expand and develop Grand Pineapple into an ultra “luxury inclusive Beaches”. That depended on the Government transferring to us an adjoining parcel of land owned by Government at a price not exceeding US$3,500,000. That was a term of the 2013 Host Country Agreement. Your Government did not keep its promise and we now understand that the land may have been sold to others.
“Alternative arrangements made with your Government to replace the Pineapple deal did not come to fruition. Not being able to realise our Beaches project we had no alternative but to sell that hotel. Were we allowed to undertake the Beaches project the resort would then have enjoyed the benefits of the Host Country Agreement? In other words, Grand Pineapple in its current state did not qualify for ABST fiscal benefits under the Host Country Agreement and ABST was charged and accounted for at the standard rate.
“Honourable Prime Minister, your letter further stated that ‘Sandals Resort pays zero taxes into the Government Treasury and will do so for 25 additional years” Sir, that is a grossly irresponsible and incendiary statement, which again has no factual basis. For example, in the fiscal year ended May 31, 2015 our total Government taxes and imposts amounted to over US$5.2 million. For the 2016 financial year the amount of taxes and imposts paid to Government was US$5.8 million. Moreover ,Sir, the Host Country Agreement does not have 25 years left to turn, as you implied.
“We venture to believe, Sir, that our contribution to the economy of Antigua and Barbuda is significant. We estimate that our direct contribution exceeds US$27.5 million per annum. We earn more foreign currency than any other resort chain on the island, and our advertising budget for the island surpasses that of any other tourist operator on the island. Our wage bill competes only with that of the Government and our efforts to increase airlift to the island is unrivalled.
“It is true that we have enjoyed the benefit of a Host Country Agreement which induced us to undertake the requisite investment to achieve those results. Having done our part we are understandably shocked that Government would now pull the rug from under our feet.
“To unilaterally withdraw the ABST relief on what appears to be the mistaken belief that we were charging guests the full rate foretells that you will now rescind the decision communicated in the letter of June 2 from Marshall & Co. Ironically, as a Caribbean investor entitled to the protection of the Treaty of Chaguaramas, we feel that we have been subjected to discriminatory treatment compared to non-Caricom investors. A foreign investor from outside the region would not have been treated this way.
“In light of all the foregoing and the damage which your letter of June 17 has done to the reputation and good name of Sandals and its many loyal employees in Antigua, we respectfully submit Honourable Prime Minister that it behoves you, Sir, to set the record straight and withdraw your letter of June 17, 2016 for, as you will learn, it is grossly defamatory. As the Daily Observer seems to have received a copy of your letter, to which I am now responding it is only fitting that we request that you likewise release a copy of this response to the newspaper as well.
“The contents of your letter have gone well beyond Antigua and have been picked up by social media including
Facebook and other international media. The potential irreparable damage is enormous and we are compelled to take the necessary legal steps to protect our sterling reputation and our brand.”