By Fay Simmons

Tribune Business Reporter

jsimmons@tribunemedia.net

The deputy prime minister yesterday said the "substantial" resolution of Sandals' tax dispute with the Government will pave the way for the $100m transformation of its Exuma property into a Beaches resort.

Chester Cooper, also minister of tourism, investments and aviation, and Exuma's MP, said he project should begin “very soon". He confirmed that the delays stemmed from the much-publicised $30.8m tax dispute between the resort chain and the Department of Inland Revenue, but said that issue has now been “substantially settled” to remove a key obstacle barring the project's progress.

“The terms are agreed. We anticipate signing an agreement very soon. The reality is that Sandals had a dispute as it relates to their taxes with the Government of The Bahamas. That dispute has been substantially settled, and now it's a question of them moving forward with the actual signing of the agreement. All of the terms already agreed so we expect forward progress very soon,” said Mr Cooper.

The redevelopment of the Exuma property into a family-friendly Beaches resort has long been anticipated as a major boost to the island's economy, as it is expected to bring hundreds of jobs and significantly increase tourism traffic.

The timeline for the project has shifted several times, though. In August 2024, Mr Cooper estimated a six to eight-month construction phase for the resort’s transformation into a Beaches property.

However, Sandals representatives later indicated that construction could take up to 15 months. Jeremy Mutton, general manager at Sandals Emerald Bay, told Tribune Business that the rebranding would begin once the necessary permits were secured that fall, with a projected 12 to 15-month timeline.

In January, Chuck Roberts, managing director at Sandals Resorts Bahamas, confirmed the resort was still in the process of obtaining the required construction approvals. However, at the same time Sandals was in a dispute with the Department of Inland Revenue over the latter's audit findings that the Emerald Bay resort only reported 40 percent of revenues earned.

Melissa John, the Exuma hotel’s financial controller, in a September 8, 2023, letter to the Department of Inland Revenue (DIR) denied the property had failed to properly disclose “the true nature of transactions” which have sparked demands for $30.844m in allegedly unpaid VAT and Business Licence fees combined.

The Department’s audit findings, which covered six years between 2017 and 2022, claimed the tax arrears had arisen because Sandals Emerald Bay and its operator, Clearview Management Ltd, 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 underpaid VAT and Business Licence fees for that period.

Arguing that Sandals Emerald Bay had breached the VAT Act by making “a false or misleading statement” in filing incorrect returns, the Department of Inland Revenue added: “In filing the returns for Clearview Management, you have reported taxable supplies of $190.768m compared to the calculated revenue of $474.919m.

“The total taxable supplies that were reported by Clearview Management were based on the net amount paid.. by Sandals Resorts International 2000 and not on the amount paid by clients to stay at the Sandals Emerald Bay resort,” the Department of Inland Revenue asserted in a July 20, 2023, letter to the hotel’s operator.

“Our position is that the taxable supply made by Clearview Management is the amount charged to the client for the room without any deductions for fees and/or services charged by related parties.” The Department of Inland Revenue is thus arguing that “taxable supplies”, upon which the amount of VAT due is calculated, should be based on Emerald Bay’s gross - not net - income.

“You have only reported 40 percent of the revenue actually earned during the audit period. You have done this by reporting the net amount of income you receive from your parent company, Sandals Resorts International 2000, instead of reporting the gross amount of income received and then deducting the amounts withheld as expenses," the Bahamian tax authority added.

“In addition, you have made a false or misleading statement by reporting the net amount of income and not disclosing the true nature of the transactions.” These assertions, though, were rejected in their entirety by Sandals Emerald Bay’s reply on September 8, 2023.

During a press briefing at the Office of the Prime Minister in August 2024, acting director Shunda Strachan revealed there were large enterprises like Sandals that owe government in taxes, but could not say how much is owed. However, she maintained the plan is to still pursue the resort for $30.8m in back taxes.