The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Opposition’s leader yesterday said he was “deeply concerned” that only the Government - and not Sandals itself - has publicly confirmed specific details on the Emerald Bay resort’s $100m redevelopment.

Michael Pintard told Tribune Business he and his party have been informed by “persons working on the property” in Exuma that they are not confident it will re-open as a Beaches-branded resort within the six-to-eight month timeframe given by Chester Cooper, deputy prime minister and minster of tourism, aviation and investments.

Again questioning whether there was a link between the Beaches announcement and revelations that Sandals is embroiled in a $30.844m tax dispute with the Government over the Emerald Bay property, he asserted in a statement that “there has yet to be an official reopening timeline, and the application and permitting process for the resort’s redevelopment into a Beaches Resort has not even started”.

This statement, based on unidentified sources, aligns with information provided to Tribune Business by its own contacts. Speaking on condition of anonymity, they suggested that plans for the Beaches conversion have yet to be fully drawn-up and approved, and that the necessary construction and other permits are not yet in place, while contractors have yet to be mobilised.

They, too, questioned the six to eight-month timeline given for the construction completion by Mr Cooper given the extent of the remodelling required. However, this is countered - and contradicted - by confirmation from other Exuma resorts that they were informed of Emerald Bay’s imminent closure in advance.

Joe Eustice, Grand Isle Resort and Residences’ general manager, said he and others were officially informed of the resort’s closure - to facilitate its transformation into Sandals’ Beaches brand - during a meeting with his Emerald Bay counterpart on July 31.

“The general manager, Jeremy Mutton, had what they call the local stakeholders— those people who supply goods from Exuma to Sandals, like the tour operators and certainly the Labour Department - they were invited,” Mr Eustice said. “So we got a message directly from Jeremy Mutton, and we were allowed and given the opportunity to ask any questions and get clarification.”

Sandals, too, put out its own statement on the Beaches plans to coincide with that issued by Mr Cooper. One possibility is that the resort chain has agreed to move forward with its plans, which it has harboured for almost a decade, in return for the disputed $30.844m tax sum being forgiven or heavily discounted.

However, Mr Pintard is correct that almost all the specific details came from Mr Cooper rather than Sandals, with the latter only referring to a “fall 2024” construction start. And the Opposition leader also voiced fears over “diminished airlift” from the likes of Delta and American Airlines as a result of Emerald Bay’s temporary closure. The carriers will likely cut frequency and seat capacity due to the reduced demand.

“We are deeply concerned. It is the most unusual thing a developer not to be a little bit more specific about what their intentions are,” Mr Pintard said. “We are concerned that the deputy prime minister has spoken to specifics that the hotel in control of the project seems unable or unwilling to speak specifically to.

“What we are hearing on the inside from persons who have been disengaged is that they do not know, and they are not confident, of this six-month re-opening. That’s from persons working on the property.” Mr Pintard said Emerald Bay’s closure, and corresponding loss of room inventory even if temporary, is likely to cause a reduction in airlift to Exuma and negatively impact all other resorts on the island.

“It’s our understanding that there’s likely to be a decline in airlift in short order from two of the major US-based carriers,” he added. “The Government should speak to this. And is there a relationship between what is proposed by the hotel and the Government insisting on this tax sum owed that spans three administrations? We’ve received no response or answer from the Government. Has the tax dispute exacerbated the situation with Sandals?”

Tribune Business sources said Sandals’ Judicial Review challenge to the tax authorities’ demand that it pay the whole $30.844m sum upfront in cash, rather than via a bank guarantee, before it can challenge the Department of Inland Revenue’s assessment is still before the Supreme Court and awaiting hearing dates. It has not progressed further since the resort chain obtained its initial injunction.

The exchanges between Sandals and the Department of Inland Revenue over the tax dispute, which have been filed as part of the court proceedings, reveal that the tax authorities insisted the resort chain could only challenge an assessment it alleged “materially overstates” the VAT and Business Licence fees due if it provided access to all books and records being demanded.

The Department, in the documents seen by this newspaper, makes clear its frustration that - three times between February 2023 and April 2023 - Sandals Emerald Bay and its operating entity, Clearview Management, failed to hand over contracts and other documents sought. It claimed that the resort chain was breaching the VAT Act’s section 62 that mandates all records demanded be handed over.

Sandals, though, argued that the records being sought belong to Emerald Bay’s ultimate parent, Sandals Resorts International 2000, and its third-party booking and sales agent, Unique Travel Corp, both of which are domiciled in Panama. As a result, the documents demanded were held offshore by other entities beyond the Bahamian tax authorities’ reach.

The Department of Inland Revenue’s assertion that “it is believed that Unique is a wholly-owned subsidiary of Sandals Resorts International 2000” was disputed by the resort chain, which described the former as a “third-party provider” with whom it has a “contractual relationship”.

As a result, the Bahamian tax authority concluded: “The company has set up a corporate structure and a reporting system that you claim makes you unable to comply with the legislation. Sandals Resorts International has full control over the third-party provider and could readily set up the booking system to generate an invoice [for] the amounts charged for VAT and gratuities.”

“As you have refused to provide invoices issued to clients showing the amount charged for the room or any other documentation to support the total VAT turnover for each year, we have estimated these amounts,” the Department of Inland Revenue told Sandals Emerald bay.

“Should you wish to dispute our estimated amounts you must provide full access to your books and records such that we may arrive at verifiable turnover totals for each year under audit.” Sandals, though, said that “we are unable to provide invoices to clients” because neither Emerald Bay, its managing company or ultimate parent “contract directly with individual clients and therefore are unable to provide invoices”.

And, disputing the com- parisons used to calculate the allegedly outstanding tax liability, Sandals said the Department of Inland Revenue figures “materially overstate the prices” and thus the taxes that are payable. It reiterated that Emerald Bay and its management firm do not contract with guests directly.

Sandals is disputing assertions by the Bahamian tax authorities that its Emerald Bay resort only reported 40 percent of revenues earned as it defended its one-of-a-kind “business model”. The Department’s audit findings, which covered six years between 2017 and 2022, claimed the tax arrears had arisen because Sandals Emerald Bay had under-reported gross revenue income for the period by more than $284m.

The dispute, according to documents filed with the Supreme Court, appears to result from the Sandals’ corporate structure and business model. All guest bookings and payments are made to the resort chain’s corporate parent, Sandals Resorts International 2000, and its third-party booking platform and sales agent, Unique Travel Corporation. Both these entities are domiciled in Panama.

Rather than funds flow up the corporate chain, from subsidiaries to parent company, in Sandals’ case the money trail appears to move in the opposite direction - from Sandals Resorts International 2000 to the resort where the relevant guest has booked their vacation.

The crux of the Department of Inland Revenue’s assessment, and eight-figure tax demand, is that Sandals Emerald Bay over that six-year period only declared the net income received from its parent and not the gross sum collectively paid by tourists to stay at the Exuma property. As a result, the resort both under-reported and under-paid VAT and Business Licence fees for that period.