By AVA TURNQUEST
Tribune Chief Reporter
EDUCATION Minister Jerome Fitzgerald defended the Christie administration from backlash after it was revealed that Value-Added Tax (VAT) would not be applied on Baha Mar’s completion, telling ZNS News that the amount that would have been earned in this regard was “miniscule”.
He also said the government would soon move to put the Baha Mar deal in the public domain, to bring an end to speculation and sensationalism on the issue.
He added that the “trade off” for waiving VAT payments for the resort’s completion was the $100 million put forth by the Export Import Bank of China (CEXIM) to pay former Baha Mar workers and Bahamian creditors the money owed to them after the development collapsed.
Mr Fitzgerald was one of the government’s negotiators for a deal to get the resort remobilised.
“What I want to make clear first of all, with regard to the concessions to the Baha Mar project, those concessions were negotiated by the prior administration, we honoured all of those concessions for the new owner and for China Construction,” he told ZNS News following a special Cabinet meeting which the government run news station said was called to discuss the Baha Mar issue.
“With regard to 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 connect with regard to that.
“Also at the end of the day, when we calculated the amount for that, because you don’t pay VAT on labour, you’re not paying VAT on imports, the only part would be a small part with regards to services. It was really miniscule 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 on the employees, all the Bahamian contractors and creditors and also to secure leases for the Bahamians who had spent millions of dollars inside the resort,” Mr Fitzgerald said.
“So at the end of the day when we looked at it, it was such a miniscule amount it was neither here nor there. So one of the things I’m really looking forward to now is for the agreement to be made public so that we can stop all of this sensationalism that’s going around where I see the government giving away concessions for two or three hundred million dollars in VAT and $400 million that (FNM Deputy Leader) Peter Turnquest is talking about, which is so far from the truth, it is not funny.
“We want to move now to try and put that on the table as quickly as possible. It’s been a good deal for the Bahamian people, there was no giveaway, at the end of the day I think once those facts are (out), I think the Bahamian people will be satisfied we made an excellent deal on behalf of the Bahamian people,” the Marathon MP said.
Before Mr Fitzgerald made his statement, Bahamas Chamber of Commerce and Employers Confederation Chairman Gowon Bowe weighed in on the issue, renewing calls for the government to clearly elucidate the status of Baha Mar’s sale to Chow Tai Fook Enterprises (CTFE), and which elements are still outstanding before a petition can be made to unseal court documents relating to the transaction.
On Thursday, The Tribune reported the latest leak of information regarding the development, revealing that general contractor China Construction America (CCA), its subcontractors and suppliers, were exempted from the payment of VAT.
While he stated that there was not enough information to exonerate or condemn the purported exemption, Mr Bowe pointed out that VAT was intrinsically a consumer tax.
“Specific to VAT, the outrage, it demonstrates a little bit of ignorance of persons speaking to it,” Mr Bowe said.
“Had it gone in the normal sense of things, they would have paid VAT upfront. The beauty is that the VAT system is one ultimately borne by the consumer. A VAT registrant that pays for a capital transaction would always recover the VAT in any event. It’s not a one time tax, like stamp tax.”
The Tribune reported on an email from CCA, headlined ‘Exemption of VAT’ and issued Wednesday, which stated that all companies working on Baha Mar’s completion had been granted “a full” waiver from payment of the 7.5 per cent levy.
The e-mail, sent by Siyao Shen of CCA (Bahamas) commercial department, said: “It’s agreed with the government that the sub-contractors and suppliers of CCA Bahamas (CCA) shall be entitled to have the benefit of a full exemption from the payment of value added tax for works carried out on the Baha Mar project.”
Having effectively confirmed that the VAT waiver covers all Baha Mar-related construction activity, and includes all its sub-contractors and suppliers - Bahamian and foreign - the CCA e-mail suggests, according to Tribune Business, that they can also recover the taxes paid on bills submitted by their own service providers and suppliers.
Its contents were last night said to be provoking outrage among Bahamians, upset that tax breaks are being granted to the Chinese when the same are not being made available to local businesses and consumers, after the e-mail was widely circulated on social media.
“VAT is a pass through tax paid by the consumer,” Mr Bowe continued. “So the actual owner is never going to pay, it’s going to offset it. No matter what the VAT amount was, there would be future VAT receipts from the same Baha Mar operation that would not be paid to the government because it would have been offset.
“As opposed to Baha Mar paying the government upfront and getting it back from VAT charged to its guests, in this scenario you don’t get to offset.
“Government is forgoing cash up front that it would not have received later on. I don’t expect Baha Mar to be exempt from charging guests. As a company this is a timing of cash flows,” Mr Bowe added.
“There is not sufficient information to exonerate it or condemn it. I’m sure that the Ministry of Finance and Department of Inland Revenue can confirm that this is just a matter of collecting it now versus later. Not that you don’t pay it, but simply of matter when do you pay it.”
State Minister for Finance Michael Halkitis declined comment on the matter yesterday.
Prime Minister Perry Christie announced the official sale of Baha Mar to CTF BM Holdings, a subsidiary of the Hong Kong conglomerate, Chow Tai Fook Enterprises Ltd, in Parliament last month.
He did not disclose the sale price of Baha Mar, adding that details of the deal are still sealed by the Supreme Court at the request of CEXIM.
The heads of agreement between the government and CTF Holdings, however, will be tabled in Parliament once negotiations are complete, he said.
Yesterday Mr Bowe said: “When we say the deal has been sealed, has the sale and purchase been finalised between EXIM and CFTE, has the agreement been crystalised? If part of the condition says you have to finish the project before you can have title, then no it’s not.
“It’s more a case of saying there needs to be very clear communication from the prime minister, the attorney general, as to what are the elements that are still outstanding.
“If there’s nothing between EXIM and CTFE then the basis for keeping it sealed has been removed.”
Mr Bowe said: “I do believe that the time is fast elapsing and there should be an aggressive move to have more details of the transaction revealed, contingent on the court agreeing to do so. The question is when are the parties going to petition the court to have it unsealed?”