A US$100M expansion plan for the Pegasus Hotel was last evening launched with Minister of Business Dominic Gaskin in agreement with proprietor Robert Badal that taxes levied on start-up investors are too stiff.
“I hope my friend Corlette is listening. How can you tax a business that’s not yet off the ground? It is not a good policy to tax what does not exist or what is being built.” Badal said as he addressed a cocktail in the Savannah Suite of his Pegasus Hotel where he launched the expansion project and where Guyana Revenue Authority’s Head of Project Coordination, Fitzroy Corlette stood.
“History will tell us that we cannot tax ourselves into prosperity…a project needs to be nurtured and strengthened until it becomes profitable and generates free cash flows, not being laden with taxes”, he added.
Moments later, Gaskin took up the issue during his brief remarks agreeing with Badal that the tax regime for start-up investors needs revisiting.
“I do agree that taxing investors upfront is not the best way of securing investment,” Gaskin said to applause from the mostly business persons and representatives in the room.
Gaskin said that he personally believes that it was important that the country’s investors help develop the nation if it wants to move to achieving the goal of having at least 500,000 new visitors by 2025.
But he said that more analysis on working out a tax regime that is mutually acceptable needs to be done and believes that there needs be more dialogue between policymakers and the business community so that this can be achieved.
He told Badal that he believes that his investment would be successful.
While Badal was upbeat about the support he has received from Gaskin’s ministry and its investment arm, Go-Invest, he bemoaned the tax regime that new businesses are subjected to.
“I believe our country’s fiscal incentive regime needs to be more supported and needs urgent reform. The withholding tax on capital projects like this needs to be removed regardless of the contractor’s origin. In fact, there should be no withholding tax in the first place,” he said.
Further, he added, any foreign services such as consultancies, trip advisor, booking agents, interest payments on loans to a non-resident carries up to 20% withholding tax…similarly stamp duty on the legal process of registering debentures and withholding taxes on the cost of foreign expertise not available locally are costly and need to be removed. Property taxes on a project like this, under the current regime would amount to close to US$750,000 annually. I could not believe when I ran the figures this morning. What is the rational of having to pay corporate taxes on a company’s income and then property taxes on the assets that generated that income?”
He pointed at the Work Bank’s ‘Ease of Doing Business Index’ which ranks Guyana at 126 of over 150 countries saying that this country has a lot of work to do.
The US$100M investment he said was a start in getting this country on the trajectory to improving on the index and someday getting into the top 10 countries where it is easiest to do business.
Badal’s vision for the remodelling of the area he owns near his current Kingston hotel is to have a seven-storey, state-of-the-art corporate office complex adjacent to a fifteen-storey tower offering luxury residential accommodation. These buildings will be accommodated on the eastern part of the property.
He said that the entire complex will offer the most innovative, mixed-use facilities on par with any first world facility of the same nature but with complementary food and entertainment facilities currently offered by the Pegasus Hotel.
Facilitated through financing by Republic Bank that would see China Harbour Engineering Company (CHEC) executing construction works, the facilities will also be equipped with the latest building management systems and a curtain wall providing floor to ceiling views of the Atlantic Ocean and the city of Georgetown’s skyline.
And beginning a transition towards green energy, an initiative which he firmly advocates and believes in, Badal said that the facility will have on top of the roof a 30,000 square feet solar panel system to power it.
The project is set to begin this month with a timeframe of three years where the seven-story building is estimated to be completed in the first two and half years while the high rise building would be completed in the remaining six months.