San­dals Clar­i­fi­ca­tion on the With­hold­ing Tax Is­sue

The Star (St. Lucia) - - COMMENT -

San­dals Re­sorts In­ter­na­tional (SRI) is grate­ful to the Gov­ern­ment of Saint Lu­cia for bring­ing clo­sure to a long-stand­ing tax dis­pute in re­spect of with­hold­ing taxes as­sessed by the In­land Rev­enue Depart­ment (IR) on Insurance costs al­lo­cated to its three re­sort com­pa­nies be­tween 2001 and 2009.

We want to make it abun­dantly clear that this is not money that the com­pany owed or that was out­stand­ing, as has been con­firmed in a state­ment by Fi­nance Min­is­ter Ubal­dus Ray­mond.

SRI ob­jected to th­ese as­sess­ments in ac­cor­dance with its statu­tory rights un­der the In­come Tax Act, and has con­sis­tently main­tained, in cor­re­spon­dence and dis­cus­sions with IR and the Min­istry of Fi­nance, that the as­sess­ments are not jus­ti­fied, and should be with­drawn. SRI’s ob­jec­tions were based on pro­fes­sional ad­vice and a le­gal rul­ing by the OECS Supreme Court that is rel­e­vant to with­hold­ing tax as­sess­ments in Saint Lu­cia.

The to­tal amount claimed by IR is $24.4 mil­lion, but this in­cludes $15 mil­lion of penal­ties and in­ter­est, as the as­sess­ments date back to 2001. If SRI had ac­cepted that there was a le­gal ba­sis for th­ese as­sess­ments, the com­pa­nies would have been able to have 100% of the in­ter­est and penal­ties waived un­der the in­come tax amnesty in ef­fect, since Oc­to­ber 2016. As SRI did not ac­cept that there was a le­gal ba­sis for th­ese as­sess­ments, it was pre­pared to use its statu­tory rights to ap­peal to the In­come Tax Com­mis­sion­ers or the Courts to have the as­sess­ments with­drawn.

The insurance costs al­lo­cated to the three re­sort com­pa­nies in Saint Lu­cia rep­re­sent their share of com­pre­hen­sive insurance cov­er­age for the San­dals Group of Ho­tels in the Car­ib­bean. Due to the sheer mag­ni­tude of the risks in­sured, SRI is re­quired to self-in­sure up to 20% of the cov­er­age, with the bal­ance cov­ered by Lloyd’s. Be­tween 2001 and 2009 the costs al­lo­cated to the com­pa­nies in Saint Lu­cia amounted to $37.7 mil­lion, and IR sought to im­pose with­hold­ing tax of 25% on th­ese costs. This tax would have in­creased the cost of SRI’s insurance in Saint Lu­cia by 25%, with no tax ben­e­fit lo­cally.

The ev­i­dence was pre­sented to and ac­cepted by the pre­vi­ous ad­min­is­tra­tion, which had com­mit­ted to work­ing with us to have it re­solved, and for which we have been wait­ing for sev­eral years.

SRI’s abil­ity to ob­tain good insurance cov­er­age at an af­ford­able cost en­sures that its prop­er­ties can re­cover quickly from hur­ri­canes and storms. This en­sures con­ti­nu­ity of op­er­a­tions for em­ploy­ees, vis­i­tors and the des­ti­na­tion. SRI was there­fore able to ob­tain an ex­emp­tion from with­hold­ing tax on insurance pre­mi­ums from 2009 un­der the Tourism Stim­u­lus and In­vest­ment Act in 2014. Other com­pa­nies were en­ti­tled to re­quest sim­i­lar in­cen­tives.

The San­dals com­pa­nies in Saint Lu­cia are fully com­pli­ant with all taxes, statu­tory de­duc­tions and pay­ments. We have a ro­bust Cor­po­rate So­cial Re­spon­si­bil­ity pro­gramme, good em­ployee ben­e­fits, and vol­un­tar­ily con­trib­ute pay­ments of US$2.00 per per­son per night to the Tourism In­vest­ment Fund. The dis­pute with IR over with­hold­ing taxes on insurance pre­mi­ums is an old and ex­cep­tional mat­ter that re­quired res­o­lu­tion if SRI was to be able to fi­nance new in­vest­ments in Saint Lu­cia. We urge the Gov­ern­ment to ad­dress the is­sue of with­hold­ing and other taxes on crit­i­cal inputs to the tourism in­dus­try for all stake­hold­ers, so that we can work to­gether to grow the econ­omy.

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