The island of Guadeloupe in the French West Indies was a Dom-Tom, that is to say one of the France’s Overseas Territories and Departments.
The Dom-Tom’s were politically and administratively an integral part of the French Republic, departments and regions of France. Their populations were French citizens and enjoyed all the privileges and advantages of being part of France and the European Union.
The black majority of Guadeloupeans were generally called simply Guadeloupeans or Antillais, whilst the small minority of whites born on the island, descended from the original French settlers, were known as Békés. Those French in temporary residence or as visitors from continental France were referred to as Metropolitans.
The economics of the West Indian Dom-Tom’s were unfortunately of dramatic simplicity. Their total export earnings from goods and services leaving the island were a mere one tenth of the value of their imports, the difference being made up by the central government in Paris in the form of transfers to another French department, be it far from mainland France.
The population was some 400,000 persons. Those employed worked in government services as civil servants, in the police, health and education and all the other tentaculer emanations of the French government administration. They were the privileged, unmoveable, with guaranteed jobs and pensions.
Less than ten percent of the population worked in the agricultural sector, of which the main exports were bananas, sugar and rum, all of which suffered from overproduction and unfavourable trade agreements.
The remainder of the population was employed in the primary industry of the island, tourism. Tourism was the hope for the future, in spite of the fierce competition from just about every other island nation in the Caribbean region.
Guadeloupe was privileged compared to most other Caribbean countries, enjoying easily one of the highest standards of living in the region. In spite of that almost thirty percent of the working age population was unemployed, they were however compensated by generous benefits of one kind or another by the French state, benefits that most other populations in the region could only dream of.
Some Guadeloupeans chose the only other alternative, which was to face the rigours of life in cold unfriendly continental France, far from la vie douce of their tropical island.
There existed a tiny independence movement which had no hope of ever winning power, as long as the manna continued to flow from Paris.
As a result of the difficult economic situation of the island, and the other Dom-Tom’s, which also suffered from the same problems, the government in Paris offered spectacular fiscal incentives for certain types of investments in the islands which would stimulate the development of the tourist industry.
Whilst those investments were designed to serve the population in general, the greatest profits more often than not went to a limited number of the privileged classes.
Amongst those were Serge Amadis and Guy Courtauld, both Békés. The two partners were specialised in selling to the Metropolitans whatever they wanted for the biggest profit possible, in order that they, the Békés, could live everyday in the same manner that the Metropolitans could only hope to enjoy, at the best, for a few days a year.
Almost every Metropolitan who visited the French West Indies was hypnotised, if only momentarily, by a dream of a place in the sun, under a coconut palm overlooking the beach and the blue coral sea. Most woke up from their dream with just a pleasant memory, whilst a few tried to turn the dream into reality, imagining they could leave their ordinary life and live like the rich or retire in the sun, with the result that the dream was transformed into a nightmare for more than a few.
“Let me tell you about the great Caribbean illusion,” said Barton settling down to his favourite subject.
“Investment in real estate under palm trees, or scams by smart con artists such as Amadis, who turn fiscal fantasies to their advantages, have cost naive would-be investors, or pigeons, as I like to call them, a lot of hard earned money,” he sipped his planters punch and lit another tax free cigarette.
“Amadis’ scam is to present investments in the Dom-Tom’s as miracle solutions to the pigeons, these appear very attractive because the fiscal advantages are very real.”
“Real!”
“Sure! Take for example a hotel and timeshare complex situated in Guadeloupe, a fairly well off individual tax payer can deduct directly from his taxes over five years, 25% of sum invested in the purchase of an apartment.”
“I see,” Arrowsmith shrugged, evidently not very impressed.
“Hang on now, in the case of businesses, companies can deduct 100% from their taxable profits.”
“Now that’s more interesting.”
“Right, so the trick is to transform individual investors into French limited companies. Like that they can benefit from a higher rate, that is if their personal tax rate is above 35%. The advantage of this legal trick is evident, I mean take someone investing as a individual, a million dollars, they could only deduct 250,000 dollars over five years.”
“Okay,” said Arrowsmith now listening carefully.
“But….if this investment was made through a limited company then the whole sum would be deductible in the first year from his taxable revenue,” Barton smiled and pleased with his revelation he took a heavy slug of rum.
“Now, I don’t want to bore you with too many figures, but imagine if someone reaches the maximum of taxation level of 56.8%, they could deduct 568,000 dollars immediately instead of 250.000 dollars spread over five years.”
“It’s beginning to sound interesting.”
“You’re starting to get the hang of it. Now listen to this, if the same hotel complex acquires a boat, then the investor gets three different advantages at the same time!”
Arrowsmith started to make mental calculations whilst Barton continued his explanations.
“The investor can first deduct his 568.000 dollars, and he can get the added value tax of 18.6% included in the million he has invested reimbursed immediately, that is 156,820 dollars, and then he can deduct each year from his revenues the annual amortisation calculated for a period of 6 to 8 years excluding taxes, that is 843,180 dollars, or a further deduction of 478,926 dollars - if he is in the 56.8% tax level!”
He eyes were bright as he excitedly told his story, he knew it by heart, having used it to exploit his sales skills to innumerable naive investors over the previous ten years.
“So you see, this person having invested a million can recover through tax deductions 1,203,746 dollars.”
“But that’s more than he’s invested.”
“Absolutely! That’s the beauty of the little scheme of our friends Amadis and de Montfort, and you won’t believe this, but this incredible situation can be improved if you borrow the initial investment of one million, because the interest can also be deducted!”
“I don’t believe it, that’s too incredible!” he said, nevertheless accepting Barton’s explanation, “but tell me why the government encourages this type of defiscalisation!”
Barton laughed.
“There’s the catch. It’s not difficult to understand why…investments in the Dom-Tom’s are extremely risky and I mean risky!”
“I see,” he sounded a little disappointed.
“Even the well known hotel chains have difficulty in reaching an occupancy rate equivalent to international standards. For example in Saint Martin, the number of rooms that have been built is disproportionate to the demand and the number of yachts is greater than the market needs,” he smiled regretfully, thinking of his own situation.
“That’s the catch then,” said Arrowsmith, who in spite of the disadvantages did not appear to be too put off by the news.
“Well the real catch is much more subtle and unfolds slowly, long after the sharp salesman,” he added relishing his explanation, “like me, has disappeared from the scene.”
“Tell me then.”
“Well the law, requires that the investments are ke
pt for a minimum of five years without loosing the tax breaks. That means that the investor is obliged to operate his hotel or boat for five years, and generally with high operating costs, I’m speaking from experience.”
The Marie Galante had been bought under the defiscalisation scheme by Castlemain with the help of de Montfort through one of his companies. Barton ran charters to offset the maintenance costs and encouraged rumours of his real financial difficulties so as not to attract too much attention to his own conspicuous high living.
“You see the law does not impose an obligation to make profits,” Barton laughed, “they are too clever for that, what they want to do is to ensure that the investor not only buys the boat, the time-share or hotel, but also he acts as an entrepreneur running a commercial operation.”
“I see, job creation!”
“Right! Now the investment of a million dollars needs something like between 300,000 to 600,000 a year in staff costs, management and advertising for a boat like the Marie Galante for example! Even more for a hotel.”
Arrowsmith laughed, it was a commonly know fact that Barton was having difficulties as a charter operator and the joke was around that he had never been out of them. It also explained why he supplemented his income by helping Courtauld with sales for his wealthier customers. He picked up a commission by confidentially whispering to them over drinks that their investment ‘was a real opportunity not to be missed’ during their mini-cruise on the Marie Galante, normally the last step before signing up.
“Therefore, a million invested could save 1,2 million in taxes but could cost the investor maybe 2 million in five years, if there is no profit on his investment. The fascination is in the tax breaks, which makes the investor overlook the profitability.”
“That’s what attracted you in the first place?”
“You’ve got to be joking, I didn’t have a dam penny, but let me tell you that’s where I made a lot of money - real money!” He boasted, discretely avoided going into the details of his rental agreement with Castlemain.
“So what happens in the end?”
“Well after five years the poor bugger’s only choice is to sell.”
“...and?”
“...and unfortunately, all that the really serious buyers are interested in…is the profitability! What is even worse is that buyers of existing property do not benefit from the tax breaks.”
“So what happens then?”
“Well the poor fuckin investor is a prisoner, not only can’t he sell his boat or hotel, but he has to pay the costs of operating the dam thing, without the least profit, unless…he practically gives it away, which is where our friend Amadis comes back into the picture.”
“Tough luck!”
“Yeah tough, and that’s why I would be in shit street today,” he admitted finally, “if it wasn’t for my friendly banker, Castlemain, who writes off most of the running costs of this rich man’s toy as business expenses through his banking deals, by bringing his friends and clients on promotional Caribbean cruises!”
“I see, well at least he’s found his place in the sun.”
“You can say that again!”
Chapter 35
Amadis
Offshore Islands Page 34
