Reopening Villa Tourism

 

Anguilla’s borders have been closed to visitor traffic since mid-March 2020 because of the Covid-19 pandemic.  Hotels and villas have had to close, and staff have been let go.  The island economy has collapsed.  Both employers and employees are close to the limit of what they can bear.  Government revenue has shrunk to half the budgeted amount.  Public expenses, meanwhile, have more than doubled.

Some of the villa owners are pressuring government to begin opening Anguilla up to tourist arrivals.  In a memo of 23 July from the Anguilla Hotel and Tourism Association to its members, there is a suggestion that villa owners and their guests be allowed in by private jet or charter from 1 August.  This is to be a soft opening preliminary to a full opening of the tourism plant this coming winter.

I have some thoughts on the suggestion that we now pull the plug on the measures that have kept us safe.

Covid-19 continues to rage throughout the world, including both the USA, our main catchment area, and Antigua, Puerto Rico and St Maarten, the hubs through which our airline passengers arrive.  The USA has the worst statistics for the disease in the entire world.

Canada and other countries that depend on tourism are not permitting anyone from the USA to enter their countries.  The USA is Europe’s biggest tourism market.  The Europeans have banned US tourists even as they open to other visitors.

Anguilla’s main defence against widespread sickness, hospitalisation and death is the availability of a safe and effective vaccine.  The likelihood is that there will not be such a vaccine this year.  The earliest would be eighteen months from the date the research institutes began to work on vaccines, ie, January 2020.  If so, this means that we cannot realistically expect to have a vaccine for Covid-19 before July 2021.  It follows that the earliest we should be considering reopening Anguilla’s borders to tourist arrivals is winter 2021.  Anything before that will almost inevitably result in our being re-infected and having to close our ports and our hotels again.

Under President Trump’s misguided leadership over the past six months, the virus has been allowed to rampage through the USA.  Why would Anguilla let any US resident in before mid-2021 when they are so evidently careless about their health?  What do they care about our health if they care so little about their own?  It would be different if we were to allow in tourists from countries where they had suppressed the Covid-19 epidemic.  But, to allow into Anguilla visitors from the USA currently is unimaginable to me.

If we do open our ports for guests of villa owners, will we be able to make them take the necessary health precautions?  Will visitors be made to produce a Covid test result that is not more than three days old showing they are clear, or be sent back on the plane they arrived on?  If they turn out later to be infected, will we be able to make them self-quarantine for 14 days?  Do we have the means or the will to police a quarantine?  These are rich and “entitled” people who are accustomed to buying their way out of any situation.

If any of them later turns up positive, we shall have to trace all their contacts and confine them to quarantine if we are to stop social spread of the virus.  Do we have adequate amounts of testing equipment?  Do we have the capability to produce timely results?  Are our health personnel trained in contact tracing?  Do we have the resources to conduct a proper tracing programme, and to enforce the resulting quarantines?

What about our stocks of Personal Protective Equipment?  Will our supplies of masks be adequate before the borders are opened?  Do we have the gowns and other PPE needed for the medical staff?  Do we have the latest models of ventilators for when we are committed to the Intensive Care Unit?  Do all the villas have adequate stocks of PPE in advance of opening for the use of staff and guests in appropriate circumstances?  Will our villa staff be trained in the correct use of this PPE prior to opening?

If we admit in visitors from the USA, and as is inevitable, the virus catches and begins to spread in Anguilla, we shall be obliged to lock the island down again for a couple more months at least, until it is contained. 

Of course, repatriation of Anguillian nationals from any country remains a continuing necessity.  Fortunately, the testing and quarantine protocols and safeguards put in place by the Health Department for dealing with repatriated Anguillians are now well practised.  Such repatriations have not resulted in any local spread of the virus since the first three cases in March.

It is arguable that the last administration suffered politically, and lost the June general election, at least partly because they chose health over economic interests.  They totally closed the island to visitors in March.  Our borders are still closed today.  The result was they limited Covid-19 cases in Anguilla to three mild ones in March.  We are free of infection today.  But the previous administration suffered serious political damage.  Many businesses closed, some permanently, and large numbers of us became unemployed.  Schools closed, and the children struggled with distance learning.

Opening our borders to visitors from a country where the infection is surging out of control will likely destroy all that our sacrifice has accomplished.  Is the present government prepared for the political backlash that will follow if they allow the virus back in to flourish for the sake of a few villa owners’ financial interests?

If we open the island to US visitors, we can expect numbers of us, not only to be committed to the ICU, but to die.  What answer will the administration give our families when they are accused of opening before the USA could flatten its own curve?  Are they ready to deal with the accusation that they allowed the villa owners to kill us off?

Other than for a short period in August, July to November are dead months for tourism in Anguilla.  It is the Hurricane season.  This is the low season for West Indian tourism.  Why open the island in this quiet period when there will be few or no tourists (other than the highly risky ones from the USA) coming by air or by sea to Anguilla?  Opening our borders to tourists of any kind now will contribute hardly a penny to either government revenue or to the economy.  There is no real economic point in reopening before late November or early December.

Are the Anguillian public prepared to deal with a new surge?  We have been safe for so long that we now all ignore the social distancing rules we used to practise in March.  People lean on shop counters, despite the printed signs; stand in line in the supermarket pressed up against each other, despite the spacing marks on the floor; and not one of us wears a mask in public.  When we let in tourists, we will need to relearn the social distancing precautions.  Will our health authorities engage us citizens in an intense social distancing revision course in the months before we let in tourists?

Finally, as Dr Fauci reminds us, we must ask what is the recommendation of the Health Authority?  What is the expert advice our Ministry of Tourism has received?  Is the recommendation that it is safe to let in visitors to villas from the USA?  Or should we wait until after a safe and effective vaccine is generally available?

Later on Friday, I was pleased to see what amounted to a Government response to the AHTA initiative on behalf of villa owners.  This was a press release titled “Covid 19 Update 13”.  It advised that Anguilla’s borders will remain closed until 31 October.  An exception is made for visitors from countries with active cases of less than 0.2% of the population, who will be allowed into Anguilla on condition.  They must comply with all relevant protocols and quarantine regulations.  That rules out visitors from the USA.  The US (with 4% of the world’s population and 25% of all Covid-19 infections) cannot meet the less than 0.2% benchmark.  We all anxiously await the arrival of a safe and effective vaccine.  I need not have worried.  No doubt, it helped that we have a physician as Premier.

24 July 2020

Revised 27 July

 

The Covid-19 MOU

Anguilla’s airwaves are filled with doom and gloom broadcasts.  Apparently, as a country and a society, we are finished.  According to one commentator heard recently, the financial position of the Government of Anguilla (GoA) is so dire that the British government is about to suspend the Constitution and take over the day to day administration of the island.

I decided to look at the available information on our public finances.  I started with the most recent document, a copy of the Hon Premier, Dr Webster’s, address of 9 July 2020 as printed in the Anguillian Newspaper of 10 July.  There, he writes that, because of the Covid-19 pandemic closing our tourism-based economy, our Treasury is projected to suffer an EC$97 million revenue shortfall (our highest ever revenue was EC$207 million in 2007).  This will make us unable to satisfy either our debt obligations or our monthly expenses.

The previous Administration on 11 June 2020 signed an MOU with the British Government for the receipt of an aid package of EC$100 million (US$37 million) offered to avert the impending bankruptcy of the island.  It is rather grandly titled the “Anguilla Covid-19 Emergency Financial Aid Programme.”

It is this MOU that is the subject of so much public grief.  In brief, the FCO’s conditions for the EC$100 million grant to us are,

(1). All disbursements must be made on submission of a claim in the form provided and accompanied by supporting documents.  The Accountant General must certify that the claim is correct.  It seems right that the Accountant General of Anguilla should be the one responsible for justifying the claim for these funds.

(2). Disbursements from the EC$100 million fund will be made monthly to reimburse us for the previous month’s recurrent revenue losses.  Support will meet proven losses, not imaginary future ones.  This seems a sensible provision.

(3). GoA should continue to meet debt amortization payments from its sinking fund.  This is a sensible provision.  We cannot be defaulting on our debt while the British taxpayer pays our public service commitments.

(4). The aid ceiling is set at EC$100 million for the 9-month period April to December 2020.  Recurrent revenue loss in any given month will be supported up to 70% of the forecast recurrent revenue (Control 1).  In other words, as I understand it, the $100 million will not be used to make up the total amount lost.  Support is limited to 70%.  This appears designed to encourage frugality and is to be commended.

(5). Revenue support will be reduced by the value of any revenue foregone in that month due to discretionary concessions approved by GoA (Control 2).  If GoA grants a duty-free concession to a hotel or other taxpayer and, therefore, looses $100,000.00, that loss is entirely voluntary and within our control.  That seems only fair.  There is no justice in having the British taxpayer make up that loss.

(6). Expenditure must remain within the overall three-month rolling expenditure envelopes set out in the cash management worksheet (Control 3).  This is a technical control, which no doubt is understood by the Inland Revenue staff, though it is meaningless to me.

(7.) The programme will be reviewed on a three-monthly basis and the grant will be automatically discontinued once recurrent revenue variances return to a manageable level of 5% or less (Control 4).  This seems only fair.

(8). Any virements/reallocations greater than $100k will be deducted from the grant (Control 5).  A virement warrant is the mechanism that permits the Minister to reallocate surpluses from one head of the budget to another.  This seems only fair.  GoA cannot redirect revenue from one head to another and then claim a shortfall.

(9). The draft Public Expenditure and Financial Accountability report will be used by the FCO as a preliminary assessment of the public financial management systems (Control 6).  This is a technical matter and no doubt the Inland Revenue people understand its significance.

(10). The FCO can request and review any GoA financial information.  It can audit the programme at any time (Control 7).  This is an obvious and sensible control, given the Chief Auditor’s repeated complaints about the negligent way in which the GoA’s accounts are kept.

(11). The House of Assembly must pass a Supplementary Budget for 2020 reprioritizing spending to meet pressures arising from Covid-19 (Provision 1).  The previous Administration pretended to do this a few days before the House dissolved, but there was no attempt to reprioritize spending.[1]  To comply with this condition the new Administration will be required to go back to the House with a more realistic Supplementary Budget.

(12). No new revenue or expenditure policy with material financial implications can be adopted by GoA unless the FCO first accepts it (Provision 2).  This seems reasonable.  The FCO has a real interest in ensuring that we do not fiddle our financial policies to unfairly take advantage of this grant in aid.

(13). We commit to maintaining progress in implementing a Goods and Services Tax (Provision 3).  We will prepare a draft Bill and Regulations regarding the implementation of GST phases 2 and 3.  This is not new.  We have previously agreed to implementing GST in stages.

Personally, I have difficulty in seeing how GST can be implemented in Anguilla.  Other than the banks, law firms, and major corporations, few Anguillian businesses keep audited accounts.  In Anguilla we raise revenue mainly through indirect taxes such as customs duty on imported goods.  There is little or no direct taxation on income.

Few employers keep accurate payroll accounts.  Businesses keep such accounts as they consider necessary for their own internal purposes.  Profit or loss is calculated based on whether the business needs to show either a profit or a loss for some reason, such as applying for a bank loan.  In the absence of accurate accounts, Social Security payments are calculated and paid by the employer with no system for checking the accuracy of the calculation.  Hotel calculations of receipts and payments of Accommodation Tax are taken on trust by the IRD.  The Interim Stabilization Levy (a minimal payroll tax) is always calculated and paid by employers based on the assumed honesty of the payee.  it is difficult to see how our businesses can be expected to calculate and pay GST with any degree of accuracy. 

The FCO cannot seriously expect our Mom and Pop businesses to suddenly purchase computers, learn to use Quicken, open bank accounts, and begin to hire accountants.  We will have no difficulty passing a GST Act, once the FCO understands that this tax will be (like many others) entirely voluntary and generally incapable of verification.

(14). We will begin the process of collecting overdue taxes by court process (Provision 4 and 5).  So far as I am aware (after 40 years of the practice of law in Anguilla) no prosecution or civil suit has ever issued for the collection of an unpaid tax.  We have instead used “administrative measures” to collect tax.  The most we could do to satisfy this condition is to carry out one or two prosecutions a year of the most egregious offenders.  There must be low-hanging fruit in the odd hotel or guest house that does not pay its Accommodation Tax that we can pick.  Political backlash can be minimized if we take the easy way out and start on a foreign owned business.  Admittedly, it is mainly the local ones that have figured out how to game the system.

(15). By 31 December we will begin on-site tax audits on at least 20 businesses and take the necessary action within 3 weeks after the audit is completed (Provision 6).  This is a manageable condition.  Law firms are required by the Legal Profession Act to have their accounts audited to maintain their legal practice certificate.  Between the Banks, international insurance companies, and local law firms, it should not be difficult to find 20 targets.

(16). We undertake to submit by 30 June 2020 a report on the expected impact of Covid-19 on the revenue and subventions of statutory bodies (Provision 7).  As the Chief Auditor never tires of complaining, many of the statutory bodies and other government agencies in Anguilla do not submit the audited accounts that are required by law.  His constant chiding in his Annual Reports did not improve this situation.  It would be a good thing for this programme to finally provide the impetus for this much desired improvement to be made, even if we have almost certainly missed the deadline.

(17). Statutory bodies must present their budgets and work plans to Executive Council by 31 July 2020 (Provision 8).  This is an existing obligation, but it is not certain how many bodies meet it.  Government’s threat of non-payment of the annual subvention should suffice to ensure compliance, even if the deadline will be missed.

(18). Each statutory body will be reviewed for contingent liabilities by 31 July.  Each should prepare a plan to improve financial sustainability and reduce expenditure arrears over the following 12 months (Provision 9).  This condition will no doubt be a hardship to many good causes such as the National Trust and the Health Authority.  But in this difficult time we must cut our discretionary expenditure to the bone.

(19). We will ensure the preparation by all statutory bodies of quarterly financial reports by 30 September with publication by 30 November (Provision 10).  Once the IRD prepares a common template for this purpose and provides a minimum of training, it should not be difficult for the Boards and Executive Directors of these bodies to comply with this condition.

(20). GoA will achieve and maintain an overall “largely compliant” rating from the Global Forum’s review of Anguilla’s implementation of the Exchange of Information on Request standard.  We will deliver an action plan to the UK by 31 December to show how we will meet any resulting recommendations (Provision 11).  This international tax transparency provision is a long time coming.  In the present environment it can hardly be contested any longer.

(21). We shall grant UK Revenue access to data on Anguilla’s residency by investment programme by 30 September 2020 (Provision 12).  If we are going to accept the benefit of these UK taxpayers’ funds, we can hardly object to giving the UK tax collector access to information about potential UK tax dodgers.

(22). By 30 September 2020 we shall begin sharing suspicious activity reports appropriate to UK civil and criminal cases (Provision 13).  At present, these reports go only to local and regional bodies such as the Central Bank and the Financial Services Commission.  If we are going to accept UK taxpayers’ funds, we can have no reasonable objection to sharing them with the UK authorities.

(23). We shall allow by 28 February 2021 UK Revenue to obtain beneficial ownership information under the Exchange of Notes signed on 19 April 2016 (Provision 14).  We have already agreed to this.

(24). We shall provide UK Revenue direct and cost-free access to our new company registry, once in place (Provision 15).  We can have no valid objection.  This is an international tax transparency objective which when implemented will place Anguilla in the forefront of company formation destinations.  Besides, it will not be long before it is an international standard.

(25). We undertake within 2 months of the last elections of 29 June to complete and submit to the FCO a credible and achievable plan to reduce net debt to recurrent revenue to below 100% by 2025 and below 80% by 2030 (Provision 16).  This condition may fairly be described as a pipe dream.  Who in their right mind is going to travel to Anguilla for pleasure by ‘plane or by boat?  If there are a foolhardy few, they certainly will not be in the numbers needed to support our hotels, restaurants, and related businesses.  We can expect the hard times that are coming to last for years.  The new normal will call for ingenuity and creativity for our people just to survive.  As with the UK Government, our public debt must inevitably increase.  There is little hope of its reduction in the foreseeable future.

I do not consider these conditions onerous or unreasonable.  We should embrace them. They provide a welcome opportunity for us to improve our shoddy public accounting of the past.  Dr Webster says he wants to renegotiate the MOU.  In my opinion, there is nothing worth renegotiating, save for the now obsolete timetabling which was made inoperative by the intervening general elections.

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[1]      http://www.gov.ai/documents/2020%20Budget.pdf