The previous article started by dealing with the Buck and his alleged stealing. This week I will be examining, at last, just where does the Buck pass. For those readers who may be smiling, this is no jokey thing. In this article I will be looking at that thing and its meaning.

Minister Gopee-Scoon’s delivery on Tuesday, 19 March 2019 in the Senate was nothing less than a ‘Phantom Presentation‘. (See video below, begins at 29:35) All part of the ‘hop skip and jump’ between wanting to appear to disclose but not really telling the public the real story. Like the olden Primary School days when as children we used to play ‘Hide and Seek‘, with the one who could hide the best as the winner, along with ‘Catch‘, with the one who could run the fastest and twist suddenly being impossible to catch. You see? I am going to explain all that now.

As noted last week, Senator Obika’s queried ‘taxes and dividends collected‘ for the two Eteck hotels in the period 2015 to 2018.

In response to Senator Obika’s query as to Corporation Tax at Magdalena Grand, the Minister explained that none had been collected, by saying –

“…As a matter of fact, we have a net operating loss of TT $276 million from the period 2008 to 2018. So that gives you a sense of the performance of the business…” (pg 18 of Hansard)

So, the Minister, in reply to a question on a four-year period, gave an answer which combines 11 years of losses. The annual figures were used to arrive at the total, but the Minister chose not to provide those for the requested years. You see?

Despite those stated losses, Eteck pays Management Fees to Hospitality Solutions International for running the Magdalena Grand, so what are those fees? Is that a secret too?

So how about Hilton Trinidad & Conference Centre? Was the reply on that Underlying Commercial Arrangement any clearer? Here is the official transcript –

“…Sen. Obika: Thank you very much, Madam President. Can the hon. Minister indicate regarding the dividend or given that the term “dividend” does not apply, but what contributions by way of shareholder agreement is given to eTecK?
Sen. The Hon. P. Gopee-Scoon: Thank you, Madam President. But that is not a question. I cannot give you an answer right now, perhaps you would want to ask another question…” (pgs 20 & 21 of Hansard)

It is all very unbecoming of our Parliament, which ought to be an edifying place. When it suits them, Opposition members ask questions which are too limited in scope – Senator Obika only wanted to know about the taxes and dividends collected in the previous four years. The time before 2015 was of no interest and what is more, there is often a real difference between an amount owed and what is actually paid/collected.

For Magdalena Grand, the Minister obscured the picture by combining 11 years losses into a single figure and offered no explanation as to:

What are the Underlying Commercial Arrangements?
Are those arrangements being observed?

This exchange does little to inform the public as to the return to the State as investors vs the tax take. The taxes are interesting details but any hotel owner would have had to pay those, so those do not measure the return on our heavy investment of Public Money into those State-owned hotels. That critical information continues to be intentionally obscured, so it is necessary to start from where we are. So I used the stated taxes to prepare estimates.

It is not possible to reliably estimate costs, other than salaries, from the taxes paid, so the analysis is confined to revenues and profits. These tables show three estimated figures for the hotels –

• Sales Revenue – which is the sum of total room revenue, bar & restaurant and rentals for functions etc. Sales Revenue is derived from Business Levy & Green Fund;
• Total room revenue – Estimated from Hotel Accommodation Tax;
• Profits – Estimated from Corporation Tax, which is of course zero in the case of Magdalena Grand.

Total room revenue is a subset of, and therefore should always be exceeded by, sales revenue.

The Trinidad Hilton Operatorship Lease, at its fourth article, specifies that ETECK is to be paid 76% of the Adjusted Gross Operating Profit (AGOP) as defined in the fifth article.

It would be in Hilton International’s interest to limit AGOP as far as possible, which could be achieved either by increasing its costs or reducing its revenues. We are unable to make any estimates as to costs, as stated prior. It is striking that Trinidad Hilton’s overall sales are exceeded by its room revenues. Over the period in which estimates can be made, that hotel’s sales totalled $175M, with room revenues at $352.8M, double the total sales.

Revenues of the Trinidad Hilton present a paradox, to say the least, so is this an area receiving attention from the ETECK professionals or BIR officials?

The Trinidad Hilton story is useful as it illustrates the actual meaning of those taxes paid and the possible impact of Transfer Pricing. These are some of the lessons we can derive in terms of these Underlying Commercial Arrangements.