Decision about AUC-agreement now contested in court – University-owners settled with tax inspectorate

POSTED: 08/21/13 12:27 PM

AUCSt. Maarten – The former owner of the American University of the Caribbean in Cupecoy dismissed comments by former Finance Minister Roland Tuitt that have created the impression that it evaded taxes after Devry Inc. purchased the university for $235 million in 2011.

“The former Minister apparently found it appropriate to disclose information on a pending tax case.  His statements imply that somehow the former AUC owners avoided payment of taxes that were legally owed or should have been owed to Sint Maarten. This information is incorrect, and since the former Minister has disclosed certain aspects of a transaction executed in 2011, we would like to make the following clarification,” the American Associated Group NV stated in a press release it sent to this newspaper yesterday.

The company said that its settlement was the result of extensive negotiations with the tax inspectorate.

“We held extensive negotiations with the competent tax authorities in 2011 to resolve all tax obligations including those resulting from the sale of the business of the company to Devry. Those negotiations resulted in a legally binding tax settlement agreement with the competent tax authorities in 2011 prior to the sale.  Indeed, the entering into such tax agreement was an express condition to the sale to Devry without which we would not have closed the transaction. Accordingly, while we are disappointed with the position taken by the present tax authorities, we fully expect that the tax court will confirm the validity of our tax settlement agreement and that the taxes paid by us satisfied all of our tax obligations to the government of Sint Maarten.”

The American Associated Group NV further more made clear that the agreement it reached was the best possible outcome for St. Maarten: “Finally, had the tax authorities not entered into the tax settlement agreement, the transaction would have been renegotiated into a different form which would have completely and legally exempted the sale from profit tax.”

The press release confirms information this newspaper obtained about the controversy former Minister Tuitt stirred up. The American Associated Group would have to pay 25 percent so-called discontinuation profit. The real estate of the university was valued at $35 million in the purchase by Devry Inc., leaving $200 million subject to this tax. The tariff is 25 percent, so St. Maarten stood to receive $50 million in taxes.

However, according to our information that has in the meantime independently been confirmed, tax inspector Maria Bas agreed to a settlement of just $7.2 million. There was apparently no consultation with the Finance Minister (at the time of the agreement Hiro Shigemoto) or with superiors at the tax inspectorate about this agreement. The ministry is now looking into the procedures that made it possible for an individual tax inspector to take a decision of this magnitude.

The government has taken the former university-owners to court in a civil procedure designed to cancel the agreement and to get its full pound of flesh.

The press release furthermore confirms reports this newspaper received about the pressure the American Associated Group put on the tax inspectorate with its suggestion that it could renegotiate the purchase by Devry in a way that would have exempted the transaction from discontinuation profit.

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Decision about AUC-agreement now contested in court - University-owners settled with tax inspectorate by