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Bad deal

Former PM warns that Sandals concessions are hurting the economy

Former Prime Minister Owen Arthur is contending that tax concessions granted to the Caribbean hotel chain Sandals are hurting the island’s finances, already reeling from a decline in revenue from the offshore financial services sector.

Presenting a lecture Wednesday night sponsored by the Sir Arthur Lewis Institute of Social and Economic Studies, Arthur said an already eroding tax base occasioned by changes to the second largest revenue earner, the offshore sector, was made worse by the concessions, not only to Sandals, but to the entire tourism sector, the island’s primary money earner.

“The Government of Barbados  . . . has set an extraordinary precedent by extending complete duty and tax free status to Sandals for 40 years, with the intention of making such a status available to other enterprises in our main sector – tourism,” the former Prime Minister said.

Sandals, which began operations here in 2013 at the former Almond Casuarina hotel in Dover, Christ Church,  has been granted a 25-year tax holiday that includes a waiver on all import duties, taxes, impost and levies on capital goods such as building materials, as well as food, alcohol and beverages.

The waiver also extends to duties on the importation of motor vehicles and personal and household effects for senior hotel staff and non-Barbadian workers.

At the end of the 25-year tax holiday the rate on concessions will be cut by 50 per cent for an additional 15 years.

Faced with mounting pressure from the accommodation sector for a similar deal, Government eventually announced that the hotel sector would be eligible for similar concessions.

Arthur said the loss of revenue as a result of these concessions had come after Barbados’ main financial trading partner, Canada, had drastically reduced the island’s once lucrative offshore business.

He explained that Barbados had been attractive to Canadian companies because this island was the only Caribbean territory with a tax information exchange agreement with Ottawa.

This advantage ended in 2007, he said, and Canada has since entered similar agreements with other countries and had been extending to them other tax deals that were beneficial to offshore companies.

“In consequence, international business and financial services have migrated from Barbados, leading to a decline in revenues directly generated by the sector from $356 million in 2007 to $97 million in 2013,” Arthur said.

He said Barbados’ other major trading partners had also been making changes to their regulatory regimes that will adversely affect the operations of international business and financial entities based here.

Arthur said the declining offshore revenue combined with the tourism tax giveaways, “signify that the Government of Barbados will continue to experience significant difficulty in raising the revenue to finance the plethora of public services that has been put in place since Independence”.

He said at its peak the international business and financial services sector produced 34 per cent of Government’s revenue, reaching an estimated total of $356 million.

7 Responses to Bad deal

  1. Brien King
    Brien King November 25, 2016 at 3:35 am

    In my opinion, there have to be something that is beneficial to Barbados for government to do that, as it wouldn’t make no sense to make a deal with someone for so long at a total lost of funds to the country, one would have to study the fine prints of the deal to have much weight to their statements. Less it would just be a lot of speculation without proof of fact.

    Reply
  2. Sue Donym November 25, 2016 at 11:05 am

    Stupidity at the most basic level. It was nothing less than myopic to believe that waiving taxes for those most able to pay was a good idea. There was no way that the NIS and PAYE contributions from employment would fill the void created by the huge concessions. Any belief that a chain would forego the volume and loyalty discounts that could be had with international suppliers, in favour of purchasing local – laughable. At the same time, additional taxes and higher levels of taxes have been exacted from those already paying – how is that so beneficial to Barbados or Barbadians?

    Reply
  3. Tony Webster November 25, 2016 at 12:10 pm

    Yuh gotta hand it to Butch: he’s the Caribbbean equivalent of “The Art of the deal” . First, you build a genuine brand, with evahting “all-included” . Then, a master-stroke of “scale up strategy”: have weak Caribbean government’s write huge checks…er…concessions…with each island being convinced that Sandals was a Starship Enterprise, and having one on the beach would guarantee the ruling party both an instant tourism IV, boost, plus continued happiness for forty , (40) years.

    Such largesse allows Sandals a huge financial room room to maneuver in the market, and to fund their advertising. The latter NEVER sells a given island on mainstream media …but just keeps selling The Brand.

    BTW: anything, virginity perhaps excepted, can be traded, bought, bartered, or sold. That includes Sandals shares…which can be sold to Putin, little green ( or yellow) men from Mars ( or China)…and in any dynamic market…things are subject to market forces…and to change. Selling the family silver is usually an irreversible decision, and a clear indication that Rocky Gully… ( or Rocky Reef) .,..is dead ahead.

    Smart people. VERY smart people. Would like to buy a few shares myself.

    Reply
  4. Phil November 25, 2016 at 7:21 pm

    I am in agreement with Mrf. Arthur’s comments. Butch Stuart – I hope no relation to Fruendel Stuart, has a highly trained and expert laden strategic marketing team with his Sandals brand revolutionizing the tourism product and brand especially in North America. Scared this administration into toeing the line and literally issuing lengthy tax benefits just to say Barbados has a Sandals too. All I can say is wow! I see no other benefit to this beautiful island paradise with the strongest dollar within the English speaking Caribbean. I say it is only fair to make the playing field level and let all hotels, local and foreign owned receive those same tax and duty free benefits.

    Reply
  5. Haskell Murray November 26, 2016 at 9:41 pm

    I agree with Arthur, if he did not know the details of this deal he would not have published them. We have not learned anything we did the same thing years ago .Remember Coopers Barbados LTD a Canadian company making ice hockey equipment and the Barrow government giving them and a whole heap of other foreign companies generous 10 year tax concessions only to find that when the concessions came to an end they packed up and leave Barbados never paying a cent in tax in Barbados.
    Sandals is a regional company based in Jamaica and I have no problem giving Sandals some tax concessions , but 40 years?
    Most of us will be dead by the time it is Sandals turn to pay taxes so we will never know if they paid.

    Reply
  6. Hal Austin November 27, 2016 at 2:38 pm

    The Sandals deal must be made public. No secret deals.

    Reply
  7. Ossie Moore November 28, 2016 at 12:06 pm

    From space shuttle circuit boards to Platex women’s wear it goes on and on. We should have stuck to producing some of the world’s best roof tiles and terra cotta, clay building blocks.

    Reply

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