By NEIL HARTNELL
Tribune Business Editor
Baha Mar will enjoy at least $11.5 million in tax write-offs if it is ever able to complete its development, Tribune Business can reveal, with its current debt to the Government pegged at $20 million.
Documents filed with the Delaware Bankruptcy Court, which have been obtained by Tribune Business, allege that the Government will write-off $7.5 million worth of real property taxes, and $4 million in gaming ‘win’ taxes owed by the former Crystal Palace casino, once Baha Mar opens its doors.
The developer, which filed for Chapter 11 bankruptcy protection on Monday, has also enjoyed “a six-month deferral” on its ‘input’ Value-Added Tax (VAT) obligations, and intends to request a further deferral from the Ministry of Finance if any net sum remains outstanding as of yesterday.
The documents seen by Tribune Business also reveal:
Baha Mar owes the Government $2.73 million in unpaid Stamp Duty on real estate transactions. Some $1.2 million of this sum relates to land transfers to SuperClubs Breezes.
Some $16.35 million in gaming ‘win’ taxes are due to be paid when the Baha Mar Hotel and Casino opens. In return, once this payment has been made, the Gaming Board will forgive the $4 million in tax owed by the Crystal Palace Casino.
A further $2 million is due to the Government via a combination of unpaid casino, hotel and Business Licence fees.
*And, apart from writing off $7.5 million in real property tax, some $5.9 million of which is past due, the Government is giving Baha Mar a “20-year moratorium” on real property taxes from February 2011.
While such tax write-offs appear designed to induce developers such as Baha Mar to complete their projects, many observers will likely question the wisdom of granting them to this extent, given both the Public Treasury’s needs and the developer’s Chapter 11 filing on Monday.
And, given Value-Added Tax’s (VAT) impact on middle class and lower income Bahamians, the extent of the tax write-offs granted to Baha Mar will likely reignite the debate over whether large investors should be contributing more in taxes.
“In the aggregate, during the past 12 months preceding the [Chapter 11 filing date], the debtors [Baha Mar] have paid approximately $800,000 in taxes and fees to various taxing authorities,” Baha Mar said in its Chapter 11 filing. “As of the petition date, approximately $20 million in taxes and fees remain due and owing.”
Breaking this down, Baha Mar added that it had “accrued and owe real property taxes in the aggregate amount of approximately $7.5 million, which consists of approximately $1.6 million in current taxes and approximately $5.9 million in accumulated arrears.
“In accordance with the debtors’ agreement with the Bahamian Government, real property taxes will continue to accrue during the construction phase of the project.
“All such taxes, however, will be cancelled upon the opening of the project. In addition, the Bahamian Government has granted [Baha Mar] a 20-year moratorium on the payment of real property taxes from the commencement of the construction project; that is, February 2011.”
Elsewhere, Baha Mar confirmed it owed $1.3 million in unpaid Stamp Duty for real estate transactions “previously closed with the Bahamian Government”. Another $1.2 million was owed on the SuperClubs Breezes deals, and $230,000 on “equity contributions” previously funded by its principals, the Izmirlians.
As for VAT, the court documents reveal: “The Ministry of Finance granted the debtors [Baha Mar] a six-month deferral for all VAT ‘input’ obligations.
“Consequently, no ‘input’ VAT amount is accrued and owing. Furthermore, pursuant to an agreement with the Ministry of Finance, the debtors’ input VAT obligations are offset by any and all ‘output’ VAT amounts collected.
“To the extent that any net VAT amount remains outstanding at the end of a six-month deferral period, the debtors [Baha Mar] intend to request further deferral from the Ministry of Finance for the payment of such taxes.”
The documents also show that Baha Mar owes $920,000 in hotel license fees for both the Melia Nassau Beach Resort and the now-closed Wyndham; some $650,000 in Business Licence fees; and a $250,000 annual casino licence fee.
And, in asking the Delaware court to approve a motion that would prevent Bahamian utility providers from discontinuing their supply, Baha Mar said it had spent an average $750,000 on utilities per month during the 2015 first half.
The bulk, some $400,000, was spent with the Bahamas Electricity Corporation (BEC), the court document show.
Of the balance, some $200,000 was paid to the Water & Sewerage Corporation, with Baha Mar’s bills with Cable Bahamas and the Bahamas Telecommunications Company (BTC) coming to $75,000 each.