The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Democratic National Alliance’s (DNA) leader yesterday demanded that the Government disclose whether the Treasury will receive nine-figure Stamp Duty payments from Baha Mar’s ‘two sales’, as he branded the Supreme Court’s rationale for sealing the deal “a cop out”.

Branville McCartney told Tribune Business that a 10 per cent Stamp Duty/VAT levy on Baha Mar’s sale, which is effectively a real estate transaction, would generate a much-needed boost when set against the Bahamas’ total $7.64 billion public debt.

He added that enforcing the 10 per cent tax would demonstrate the Government’s commitment to reducing a public sector debt equivalent to 90 per cent of GDP.

However, several Tribune Business sources familiar with the Baha Mar situation, speaking on condition of anonymity, told this newspaper that the Government is likely to waive the payment of Stamp Duty/Value-Added Tax (VAT), or offer a concessionary rate, as part of the agreement to complete and open the project.

As a result, Mr McCartney challenged the Christie administration to give him the same ‘tax exemption’ deal on property he is currently selling if such incentives are being granted to the Chinese.

“I think that’s a question the Government has to answer, and the Government has been very quiet about it because the deal is sealed,” Mr McCartney told Tribune Business on the Stamp Duty/VAT issue. “It’s a huge question, and one that I’m curious for the Prime Minister to answer.

“I challenge the Government to ensure Stamp Duty is paid if they want to bring down our debt. I challenge them, because this is an opportunity to do that.

“They [the Chinese] should be paying Stamp Duty, just like the Bahamian people have to pay Stamp Duty now. If they don’t have to pay it, I don’t have to pay it,” Mr McCartney continued.

“I want to ensure they tell me, as a small Bahamian business person, that they have to pay Stamp Duty. I want them to tell me that if the Chinese don’t pay, then I don’t have to pay it.

“I have a pending sale of some property now. If they let the Chinese get away without paying Stamp Duty, I want the same deal as a Bahamian citizen of this country, who doesn’t have the resources of these foreigners.”

Even allowing for the fact that bids to purchase Baha Mar have “not come anywhere near” to paying off the $2.45 billion debt owed to the China Export-Import Bank, the offers are still likely to have been over the $1 billion mark.

Based on the normal 10 per cent Stamp Duty rate, this would still leave the Public Treasury looking at a $100 million-plus windfall (2.5 per cent Stamp Duty, 7.5 per cent VAT).

And, as revealed by Tribune Business, Baha Mar and all its assets, including the real estate, are being sold not once but twice. The first sale is to a special purpose vehicle (SPV) owned by China Export-Import Bank, the project’s secured creditor, to facilitate the construction completion, while the second, later transaction, is the sale to the proposed purchaser.

This implies that the Government could get ‘two bites at the cherry’ in terms of the combined 10 per cent VAT/Stamp Duty levy, with the sale to the ultimate purchaser likely to realise more because the Baha Mar project will have been completed by then.

However, there is precedent for the Government to either waive the Stamp Duty entirely, or agree a lower, concessionary rate to facilitate the sale of Bahamas-based mega resorts.

The former Ingraham administration is believed to have done this for the debt-for-equity swap that led to Brookfield Asset Management taking over the Atlantis resort, given that the $200-$300 million sum due to the Public Treasury will have acted as an impediment to that deal.

A similar tax payment could also act as an impediment to Baha Mar’s sale and opening. However, many observers will likely say that if the Government has agreed such a waiver, then it amounts to the Bahamian taxpayer helping to finance both the sale and payments to local creditors.

Meanwhile, Mr McCartney also described Justice Ian Winder’s rationale for agreeing to ‘seal’ details of the Baha Mar construction completion and sale agreement as “a cop out”.

Justice Winder said he acted as he did “to preserve the integrity of the process” for selling the $3.5 billion development, describing court Orders to ‘seal’ files and keep information confidential as “not unusual” in circumstances such as Baha Mar’s.

Justice Winder wrote: “The reason for the sealing was to preserve the integrity of the sales process, which remains a commercially live issue.

“The process of approval [of the sales process] by the court ought not to impact the onward sale of the assets to the proposed purchaser or a subsequent purchaser, should the proposed sale not be concluded. This is not unusual.”

He added that the court had to balance the public’s interest and ‘right to know’ with “other equally compelling considerations”.

He did not detail what these “considerations” were, although they are likely to involve allowing the Baha Mar sales process to move forward free from scrutiny and public speculation.

“Whilst the matters are of importance to the general public, having regard to the overall impact to the people of the Bahamas and the Government involvement,” Justice Winder said of Baha Mar, “it is nonetheless a commercial transaction of a largely private nature.

“The court is sensitive to the importance of ‘open justice’ and that proceedings in court should be open to the public, but this is not the only consideration, and it must be balanced against other equally compelling considerations.”

However, in an unusual move, for politicians rarely criticise judges, Mr McCartney argued that the Bahamian people’s ‘right to know’ outweighed the ‘confidentiality’ argument, given that Crown Land and investment incentives/tax breaks were involved.

“I think it’s a cop-out,” the DNA leader told Tribune Business of Justice Winder’s September 27, 2016, ruling. “We need to know. It’s not the Prime Minister’s business, it’s not the Chinese’ business; it’s the Bahamian people’s business.

“The judge needs to stand up and do what’s right. It’s our money and our land that was given away. It’s our economy and our land that was given away. It’s our economy and our people involved in this.

“In essence, they’re saying it’s none of our business when it’s all our business. It’s more our business than the Chinese or the Government’s. It’s the Bahamian people’s business.”