VAT and UTICO

By James Milnes Gaskell

Every sale item except those zero rated will be subject to VAT on the day it comes into law. This means that the entire inventories of the warehouses, stores and shops of imported goods which have already paid their consumption tax will be subject to an additional 17% upon sale. Let us say that on October 31st a refrigerator is on sale at 1000 dollars. On November 1st, the store has to charge an added 170 dollars, if it is to maintain its normal mark up. No-one is suggesting that merchants will reduce their mark ups in a gesture of universal magnanimity. In a year or so when existing stocks have been sold and new stocks, which will not have borne the 22½% consumption tax are sold, prices would in theory be reduced. A one month transition period plus bonded warehouse is so short as to be irrelevant and pointless. The VAT is a federally imposed tax. Dr. Douglas had his re-election in January of this year. The VAT will not influence his party’s chances some four years on but a spike in the cost of living in the early part of 2011 will not do Mr. Parry’s party any good with the voters. Is he not able to insist upon realistic transition provisions and, above all, time for the old system and the new to flow together so that there is not, as there will be, as presently planned, many months in which imported goods for sale are double taxed?

What to make of the UTICO matter? An agreement document between the present NIA and UTICO has somewhat suddenly and to most of us unexpectedly surfaced in public via the CCM Opposition. It is an arrangement whereby a company called UTICO take over the registration of offshore companies for and on behalf of the jurisdiction of Nevis. The Opposition cry ‘Foul’ and declare that the Administration is giving away Nevis’s offshore business, worth EC$10 million per year.

What I say is this: we have had an offshore company registration business for 25 years. In year 2010, although in total some 50,000 company registrations have been made, only 16,000 remain active. In comparison to the BVI and the Caymans and many others we remain a minnow. I have always understood that it would be quite possible for Nevis to jump into the big league if it accepted that, to begin with, the Industry would have to receive here in Nevis a considerable influx of foreign experts, comprised of tax and trust lawyers, accountants, insurers etc. It is futile to suggest that we have this expertise here at this moment but, as with Four Seasons, local talent would appear and could accept opportunities for further training abroad. Left to itself, it is clear that our industry is stagnant and not making any moves to take itself to a different level.  Stagnant industries that do not adapt fall increasingly behind their competitors and often wither away. Under these circumstances it behoves our Government to see if it can do anything to bring about some new kind of offshore industry to bring more to the Revenue.

It is impossible to know whether the UTICO arrangement will work well or not. Although the Premier has made his assessments of the persons behind the company, the rest of us are left in ignorance as to their identity. I welcome the Premier’s intention to boost the industry, but we have insufficient information to be sure that he is joining Nevis with top flight offshore entrepreneurs or a bunch of opportunists such as the Newfound people to whom the previous Administration gave away so much. The Premier is, following the leaking of the supposedly confidential agreement between NIA and UTICO, and the CCM Press Conference, on the defensive. This points up the need for a Media king at the heart of the Administration, who would have explained to the rest of us in advance what was going to happen and why. That approach leaves room for valid criticisms to be taken into consideration before agreements are finalised.

The CCM has made a number of what could be reasonable points about the UTICO deal coupled with unworthy attacks and unproven assertions. Because of the latter, it is hard to give credence to their opposition. The implication of the CCM statement: “The CCM notes with grave concern that the Company which will act as Registered Agent for UTICO and which has already been established in Nevis has been formed by lawyer Sonya Parry, the daughter of Premier Joseph Parry, having an address at Colquhoun’s Estate, St. Thomas’s Parish, Nevis and the said Sonya Parry acts as the sole director of that Company as at 23rd April 2010” is that there is something fishy going on between father and daughter and UTICO. Miss Parry has been obliged to state that she is a salaried employee of the law firm that was instructed by UTICO and that there was not and could not have been any possibility of personal gain. We want a decent, intellectually honest opposition. We are not getting it. Discreditable attacks of this nature tend to oblige one to discount their other declared objections. Apparently, Miss Parry said that she would be taking legal advice. This led Mark Brantley to boast on his VON programme that he was the No. 1 law student at UWI on two campuses and that he had been to Oxford, the No. 1 University in the world, and that no one should dare to take him on. I don’t know what influence that will have on Miss Parry, but it brought to my mind a recently read quote, “He fell in love with himself at an early age and has been faithful ever since.” Also on the air he made much of the amounts he claimed would be paid to UTICO in the first four years, adding them up to a total of $18 million, and contrasting that figure with the amount UTICO might invest at $5 million. I do not think he made clear that whilst the $18 million was EC Dollars, the Premier had given a suggested investment figure of $5-10 million US Dollars.

Then on VON’s other CCM programme we had Ted Hobson saying that the UTICO agreement should have been made public (I agree), that it was the worst agreement he had ever seen, that CCM would revoke it as soon as they got into power, and that it should have been filed in the Registry so that the public could see it. He went on to say that as the lawyer to Four Seasons he had insisted that their agreement with the NIA be filed at the Registry. (Lawyers normally take instructions from their clients rather than the reverse.) All important agreements should be so filed, (I agree) especially this one with UTICO. All this left me wondering why, if he had insisted on the registration of the Four Seasons Agreement, he did not do the same in 2005/6 when his Party was in office and signed two Great Give Away Agreements with Newfound. These Newfound contracts were not made available to the public until the new Administration came into power in July 2006. Mind you, the present Government’s agreement with Newfound is still unavailable, nor has the agreement with West Indies Power, promised some 18 months ago yet been made public.

My friend Elton Marcus Hull, in his new suit of sharp shiny blue, said that the offshore industry had only been stagnating for four years. The truth is that over a 25-year period it has fluctuated at a low level. If the suggestion is that it is only after NRP arrived in Government that the industry stagnated, this is not true. Anyway, it is the world wide recession which has limited new company formations etc.

I like to come to conclusions in my articles. You have them for the VAT, but for UTICO I find the whole thing too nebulous. It might be the way to take us into a new league. It bears some comparison with Geothermal. Under CCM we would still be stuck with the OAS Agreement and have gone no further towards finding a developer. With NRP we have our developer, but so far no useable development, or visible agreement. However, we know it is there. We have seen the steam come out of the ground. It will happen. It is not so easy with the offshore business. There is no steam to impress us. We have to take it on faith, and hope. The Premier is an honourable man, who himself has had experience of the offshore industry. He has explained that his motive has been to guide Nevis into the big league of the offshore business. There is much competition. Has he taken the right steps and with the right firm?  I do not know.  I am uneasy. Who is UTICO?  Apparently, a company registered in the Marshall Islands, an offshore jurisdiction where the names of shareholders in companies do not have to be revealed. What has been their pitch to the Premier concerning their expected reward for the actions they intend to take in respect of the Nevis Registry? And what have they claimed would be our likely benefit? Figures must have been presented surely? What are they saying to prospective investors? I together with most of my readers are shareholders in Nevis Limited. Let us say our Company’s annual meeting is next week. We should all be pressing our Managing Director, the Premier, to produce some reasonably based forecasts in dollar terms and to satisfy us that our Company is making agreements advantageous to us with substantial persons who are masters of the offshore business. 
Until then what is there to go on but hope?