Response to Sandals by Leader of the Opposition Hon Philip J Pierre
PRESS RELEASE – IN a Sandals press release dated 17th September, 2018 and an article by one ‘Frank Solomon’ on the $24 Million Withholding Tax issue the author implied that I as Deputy Prime Minister in the last Saint Lucia Labour party government was somehow involved in “sustained efforts to try and tarnish the good name and reputation of our company”.
Let me say that I have never in the past ever uttered a disparaging word about Sandals on their investment in Saint Lucia. I have always lauded the contribution of the Sandals Hotel Group to Saint Lucia’s economy and tourism industry.
For the sake of clarity, let me state the circumstances and facts surrounding the $24M Withholding Tax issue:
1. The issue is not about tax incentives; it’s about an assessment raised by the Inland Review Department based on Section 76 and Schedule 3 of the Income Tax Act relating to Withholding Tax for the period 2001-2009. (It is important to note that the UWP were in power from 2006-2011.)
2. Withholding Tax is a deduction on payments made to non-resident service providers and is paid by the non-resident service provider.
3. When assessments are raised by the Inland Revenue on a company or individual there are six options available to the taxpayer if there is any disagreement. a) The company objects to the Comptroller within 30 days. b) If there is still no agreement the company lodges an objection to the Tax Commissioners for a hearing on the matter and the objection can be sustained or waived. c) If the company is still not satisfied then court action can be initiated and the matter settled. d) If the company is not satisfied with the ruling it can appeal to the OECS Court of Appeal. e) Then an appeal can be made to the Privy Council for a final determination. f) Or a request can be made to the Cabinet of Ministers to waive the tax.
4. Sandals claims that the assessments were “not justified but were incorrectly determined and should have been withdrawn”. For whatever reasons they ignored the appeals process but in 2016 approached the Cabinet of Ministers and not the Cabinet led by the Hon Stephenson King from 2007-2011, the period when the assessments were made.
5. Sandals received incentives from the government of the Saint Lucia Labour Party in 2013 for fifteen years and further incentives in 2015 under the Tourism Incentives Act.
6. It is never the custom for Inland Revenue to take “legal efforts” to collect taxes unless all remedies available to the tax payer have been exhausted. So to suggest that the failure on the part of Inland Revenue Department to pursue the recovery of the tax in question was in anyway an admission that the assessment was without validity is unsound.
7. The “Ruling” referred to does not relate to the Sandals in Saint Lucia but is a case titled “Bank of Nova Scotia v The Appeal Commissioners”. Based on legal advice the Inland Revenue Department were advised that the cited case related to allocation of expenses between a Head Office and a branch of the same legal entity. In the Sandals case, the subject of withholding tax was based on transactions between separate companies, and therefore a very different legal context.
8. If Sandals claims that they were relying on professional advice and the Inland Revenue assessment was unjustified, the best route would have been to test the issue in the Court for a determination.
9. “Addressing” the Withholding Tax cannot be interpreted as waiving the entire amount.
10. The government of the Saint Lucia Labour Party opted to allow due process of law instead of direct political interference in what was basically different interpretations of Section 76 Schedule 3 of the Income Tax Act.
11. Finally, I am of the opinion that since that matter had been decided on by the Inland Revenue, Sandals should have used all the available avenues to settle the issue. However, I remain committed to foreign direct investment that will bring sustainable benefits to our country.