VAT waived as a trade-off
ROYSTON JONES JR.
Guardian Staff Reporter
Published: Jan 06, 2017
What was initially presented to the Bahamian people as a “gift/ex gratia” payment to the thousands of former Baha Mar employees and unsecured creditors, was in fact a trade-off for value-added tax (VAT) concessions for the development’s general contractor, China Construction America, Minister of Education Jerome Fitzgerald revealed yesterday amid heightened public scrutiny surrounding details of the sealed agreement.
“What I want to make clear first of all is that with regard to concessions for the Baha Mar project, those concessions were negotiated by the prior administration,” Fitzgerald told ZNS at the Office of the Prime Minister.
“We honored all of those for the new owner and for China Construction [America].
“With regard to the value added-tax, I think the issue arose because the completion part of the project, which was really a small amount just to complete the project, the request was made with regard to whether or not value-added tax would be charged or collected with regard to that.
“At the end of the day, when we calculated the amount for that, because you don’t pay VAT on labor, you’re not paying VAT on the imports, the only part was really a small part with regard to services, and it’s really minuscule as far as we were concerned.
“At the end of the day, the trade-off was $100 million, which we got in order to settle all of the employees, all of the Bahamian contractors, creditors, and also to secure the leases for the Bahamians, who had spent millions of dollars inside the resort.
“So, at the end of the day, when we looked at it, it was really such a minuscule amount, it’s neither here nor there.”
The Nassau Guardian revealed yesterday that as part of the agreement with the Chinese to get the project remobilized, opened and the former workers and unsecured creditors paid, the government agreed to waive VAT for CCA.
An email leaked to The Guardian revealing the VAT exemption — dated January 4 — directs all subcontractors of CCA to present invoices for payment that are devoid of VAT charges.
The full details of the agreement remain obscure.
Chairman of the claims committee responsible for Baha Mar payouts James Smith has said the Export-Import Bank of China (CEXIM), after negotiations with the government, decided to “go in their pockets and basically make what, in their view, is a gift to the Bahamian workers” associated with Baha Mar.
Smith said the payouts were being made ex gratia.
Prime Minister Perry Christie, who announced the agreement with CEXIM in August, also repeatedly said the funds for payment of claims is “an ex gratia amount from a settlement between the government of The Bahamas and the China EXIM Bank”.
The payout process was completed last month.
Yesterday, Fitzgerald, one of the lead negotiators for the government in the recent Baha Mar talks, said he looks forward to the agreement being made public, so as to stop “all of this sensationalism that is going around where I see the government giving away concessions for $200 million to $300 million in VAT and $400 million that [FNM Deputy Leader] Peter Turnquest is talking about”.
These claims are far from the facts, Fitzgerald claimed.
“We want to move now and try and put that on the table as quickly as possible, so we can clear this up,” he said.
“It has been a good deal for the Bahamian people. We negotiated an excellent deal. There was no giveaway. And I think once those facts come out the Bahamian public will be satisfied.”
The agreement, which the opposition has called a “secret deal”, remains sealed by the Supreme Court.
The government said the CEXIM Bank requested that the agreement be sealed.
The FNM has insisted it would, if elected, reveal the deal and reverse any part of it that is not in the best interest of Bahamians.
But the government has insisted it has not agreed to any more than the former administration conceded and the agreement bodes well for the nation and its citizens.
A sales agreement has been executed for Baha Mar to be sold to Hong Kong-based Chow Tai Fook Enterprises (CTFE).
The development will create more than 1,500 jobs by the opening of its first phase in April with the opening of the casino, casino hotel, the golf course and convention center, according to the prime minister
By December 2017, the staff complement is expected to reach between 5,700 and 7,000 jobs, according to the government.