Introduction
I am grateful for the fact that the Turks and Caicos Islands are blessed to have a resort such as Beaches TCI. However, I have a major problem when developers put us in a hostage position.
The announcement by Beaches of their impending closure two years in advance is a major threat to the Turks and Caicos economy. Perhaps, Beaches is saying the $60million is also threat to the survival of their business especially if the money was never collected from guests. If Beaches never collected the money from guests, then it is a different matter. If the majority of the$60million is penalties that this too is a different matter. If Beaches indeed collected the money from the guests, then it should be paid over to the Government. However, we do not know the full story as the Government has not release any major details on this situation due to the legal issues.
This whole Beaches Saga is a wake up a call and it is time we take a serious review of other opportunities and a review of our penalties on our tax structure.
Beaches Contribution
As a result of Beaches, our country receives significant exposure to the world through their aggressive advertising and marketing. There is an increase in international airlines to TCI and consequently, our land-based tourist arrivals increased.
Beaches is the second largest employer after the Turks and Caicos Islands Government. Beaches also plays an integral part in our community events through sponsorships and donations.
Issue
Beaches Turks and Caicos Islands have claimed that in 2017, they were charged additional taxes and penalties as 213% overall resulting in over $60million. They also claimed that have over paid in taxes and the Government owes them. The Government in their response has confirmed that Beaches are not avoiding the payment of taxes.
A review of the penalty on Accommodation tax
The accommodation tax collected by TCIG for the year ended March 31, 2018 was $59,152, 185. I am not sure how much of that is from Beaches but I would imagine more than 60%.
The accommodation tax requires all relevant stakeholders to charge their guests 12% and to remit the collections to the Government by the 21st day of the following month. I believe that all stakeholders should follow the law of the country and charge the 12% and remit it to TCIG. After all, it is money collected on behalf of the Government.
However, I do have an issue with the 10% compounded penalty rate. Someone can be charge up to 120% for one year. I think the Government needs to review this. I know this was implemented to encourage people to pay on time. However, this is not a deterrent to some businesses as some are still not paying on time.
I think the penalty is too excessive. While, people should render what is due to TCIG, if the current penalties are imposed, most of these businesses especially the small business will not be able to remain in business should they not pay the taxes on time.
I think people should pay a penalty for being late but not at a compounded interest rate. I know of many small businesses who were assessed a penalty which was more than the actual tax in itself. I think the rate should be simple and should applied to all Government agencies including NHIP and NIB.
I do not know how much of the $60million include penalties for Beaches but it would be great if we can get a breakdown of the $60million. I think some consideration should be given for the waiver of the penalties. Obviously, if we do it for Beaches, we should do the same for other businesses.
I also think we need to review the all-inclusive methodology. While guests may not have a breakdown of their rates on their invoices, the all-inclusive accounting department knows what the room rate, the food and beverage rate should be. I have a feeling this is what the real issue is with Beaches. How is the tax really calculated and what is really charged to the guests?
Opportunities
While our governments like to take credit for developments that they were not proactive in bringing to these islands, the Beaches issues is a wake-up call to explore other opportunities. I am aware that there is a team set up to actively pursue the expansion of the Offshore Finance Industry. This is a great initiative, a topic I will talked about in a future article.
However, in the short term, tourism will continue to be our main industry and we must encourage locals to unite and build major resorts throughout the Turks and Caicos. Of course, access to financing will be an issue.
If Beaches is serious about their threat, we in the meantime need to pursue developers who can purchase Beaches and use a brand greater than Beaches. If Beaches indeed owes the Govt $60million, the Government should have a right to acquire part of their assets for the value of $60millon if Beaches do not pay the $6omillion.
If Beaches does not close, we must still be pro-active in actively seeking major developers to the islands who can attract other brand names to the islands. Do not wait for the developers to come to us. We go to them even it means the Government partnering with some locals to create and construct hotels in TCI.
Beaches knows that we depend on them and they will use that card as an opportunity for them but a threat for us. We now need to use their threat as an opportunity for us.
Government $500K annual contribution
Based on my understanding, under the previous administration, the Government made an arrangement with Beaches to contribute $500,000 annually to Beaches marketing program in lieu of Beaches closing for summer breaks. I do not know if there is a signed agreement with TCIG and Beaches and I do not know if the $500k payment continued under our new administration but if it did, then the Government needs to let Beaches know that they will discontinue the payment this year and next year if they close in September and October in 2019 and 2020.
Conclusion
I believe relationship building is important in any relationship, however no investor should have so much power to threaten the livelihood of a nation. I know that some people are encouraging the Government to collect all of the $60million and let Beaches close its resort as per their schedule.
It is so easy to say so but in reality, it will have an adverse impact on our economy. However, we need not fear. God will provide but we need to be aggressive in our search of alternatives and other opportunities. We just cannot sit there thinking it is going to work out without having a plan. It appears that the Government is working on a solution but cannot say much about it due to the legal issues.
Until the Government says the other side of the story, we will continue to speculate. I do hope that the issues are resolved in a timely manner and that our country do not have to face these kinds of threats in the future.