{"id":136449,"date":"2018-08-03T06:45:24","date_gmt":"2018-08-03T11:45:24","guid":{"rendered":"http:\/\/www.ict-pulse.com\/?p=136449"},"modified":"2018-08-02T20:19:35","modified_gmt":"2018-08-03T01:19:35","slug":"governments-decide-agreements-made-fair-cry-foul","status":"publish","type":"post","link":"https:\/\/ict-pulse.com\/2018\/08\/governments-decide-agreements-made-fair-cry-foul\/","title":{"rendered":"When governments decide to back out of agreements they made, is it fair to cry foul?"},"content":{"rendered":"

The Government of Antigua and Barbuda has announced that it intends to withdraw an income tax exemption it had given to Digicel and Flow. However, is such a change of face reasonable, or should the companies cry foul?<\/em><\/p>\n

 <\/p>\n

In the regional newspapers last week, was an article on the new posture adopted by the Government of Antigua and Barbuda that the telecoms companies, Digicel and Flow, must pay taxes (Source:\u00a0 Daily Herald<\/a>). Under the previous administration, both companies received tax concessions, which included a corporate tax exemption from the standard rate of 25%. The current government, led by Prime Minister and Minister for Finance, Gaston Browne, has indicated that it will no longer honour that concession: hence the companies will need to pay taxes.<\/p>\n

Legal battle likely<\/h3>\n

Luckily, Prime Minister Browne appreciates that Digicel and\/or Flow are likely to challenge this change of position, and take the Government to court. One of the main arguments they are likely to make is that they built their business case to enter the Antigua and Barbuda market based upon the terms and conditions agreed. Hence, it is unfair for one of the parties \u2013 the Government \u2013 to unilaterally decide to change key of the provisions of the agreement.<\/p>\n

Concessions to increase country attractiveness for investment<\/h3>\n

Another argument that Digicel and Flow are likely to make is the fact that Antigua and Barbuda were prepared to give the concessions they did to increase the country\u2019s attractiveness for investment. Among the six sovereign Organisation of Eastern Caribbean States (OECS), Antigua and Barbuda was the only one that was not part of the Telecommunications Sector Reform Project of the late 1990s. Out of that project was end of the monopoly regimes that had been in place, governments divesting themselves of their interest in then existing telecoms companies, and the launch of competition including the entry of Digicel into those markets. Hence, in order to not fall too far behind its sister OECS territories, Antigua and Barbuda would have needed to offer attractive concessions to prospective telecoms entrants \u2013 which it did.<\/p>\n

To that end, the telecoms companies have made \u2013 \u00a0continue to make \u2013 considerable investment in Antigua and Barbuda: to initially deploy their networks, and subsequently, to maintain and upgrade the infrastructure. For example, last year, Flow announced<\/a> that it had begun rolling out 4G LTE (Long Term Evolution) technology in that country. As a result, Antigua and Barbuda is already beginning to enjoy faster download speeds, as reported in our latest actual download speed snapshot update<\/a>. Hence, it could be argued that it is now unfair for the Government to withdraw the concessions when the companies have acted in good faith, delivered improved telecoms services to the country, and are still in the process of realising a return on their investment.<\/p>\n

Governments are strapped for cash<\/h3>\n

However, as much as the withdrawal of the tax concessions is likely to be a highly contentious issue for the parties involved, the fact of the matter is that the Government of Antigua and Barbuda, similar to most, if not all, Caribbean countries, is strapped for cash. As a result, it needs to be able to fully tap all potential revenue sources. The telecoms companies are generating considerable revenue, and even profit, which is being repatriated to their headquarters, and is being rolled up into their regional and\/or global financial framework.<\/p>\n

Take it or leave it<\/h3>\n

For its part, and according to Prime Minister Browne, the Government of Antigua and Barbuda is prepared for the Digicel and Flow to leave if that they are not will to pay taxes (Source:\u00a0 Daily Herald<\/a>). However, with the investment both companies have made, the Prime Minister would be aware that essentially, he is wrapping the companies over the proverbial barrel and forcing their hand. With the significant investment both Digicel and Flow have already made in Antigua and Barbuda, they are unlikely to be prepared to just cut their losses and walk away.<\/p>\n

However, it ought to be noted that as was reported one of our news roundups in June 2018<\/a>, Digicel is selling its cell towers across the region, and will lease them back from the new owner. Whilst this arrangement should help the company to reduce debt and streamline its operating expenses, it also reduces its asset base in the region, and thus Digicel\u2019s ability to walk away, if needed.<\/p>\n

Final thoughts<\/h3>\n

Although the Government of Antigua and Barbuda might ultimately prevail, Digicel and Flow have the ability to tie this matter up in court for the next several years, at which time, the current political party might no longer be in power. While there should be empathy for what the Antigua and Barbuda Government might be experiencing, it was willing to pay the price for the country\u2019s telecoms environment to develop. Now that it has \u2013 to the benefit of its citizens, the private sector, and even the government itself \u2013 it can seem disconcerting and disingenuous to now want to change the rules.<\/p>\n

 <\/p>\n

Image credit:\u00a0\u00a0Alachua County<\/a>\u00a0(flickr)<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

The Government of Antigua and Barbuda has announced that it intends to withdraw an income tax exemption it had given to Digicel and Flow. However, is such a change of […]<\/p>\n","protected":false},"author":2,"featured_media":136451,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","om_disable_all_campaigns":false,"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[11],"tags":[71,53,99,107,87,212,12],"class_list":["post-136449","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ict-tech","tag-businesses","tag-competition","tag-digicel","tag-flow","tag-legislation","tag-policy-2","tag-regulation","et-has-post-format-content","et_post_format-et-post-format-standard"],"jetpack_publicize_connections":[],"aioseo_notices":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/i0.wp.com\/ict-pulse.com\/wp-content\/uploads\/2018\/08\/Cancelled-Stamp-Alachua-County-flickr.jpg?fit=1024%2C683&ssl=1","jetpack_shortlink":"https:\/\/wp.me\/p2iE1G-zuN","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/ict-pulse.com\/wp-json\/wp\/v2\/posts\/136449","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ict-pulse.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ict-pulse.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ict-pulse.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/ict-pulse.com\/wp-json\/wp\/v2\/comments?post=136449"}],"version-history":[{"count":2,"href":"https:\/\/ict-pulse.com\/wp-json\/wp\/v2\/posts\/136449\/revisions"}],"predecessor-version":[{"id":136452,"href":"https:\/\/ict-pulse.com\/wp-json\/wp\/v2\/posts\/136449\/revisions\/136452"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ict-pulse.com\/wp-json\/wp\/v2\/media\/136451"}],"wp:attachment":[{"href":"https:\/\/ict-pulse.com\/wp-json\/wp\/v2\/media?parent=136449"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ict-pulse.com\/wp-json\/wp\/v2\/categories?post=136449"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ict-pulse.com\/wp-json\/wp\/v2\/tags?post=136449"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}