By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The web shop industry has issued close to $100 millionworth of mortgages that are outside the Central Bank’s regulatory purview, a leading consultant to the industry yesterday adding that this was costing commercial banks $500,000 in fees per annum.

Paul Major, principal of Major Consulting, told the National Conclave of Chambers of Commerce that the Government could generate $60-$70 million in new revenues “tomorrow” if it taxed both web shop winnings and the sector’s gross take.

He added that the level of technology and sophistication of Bahamian web shop enterprises “far exceeds” that of commercial banks, arguing that this meant it was “almost impossible” for the Government to not have control over the industry once legalised.

Mr Major, a consultant to at least two major web shop enterprises and an advocate of the failed ‘Vote Yes’ campaign in 2013, said: “The level of technology in the web shops today exceeds that of the banking industry. It’s so sophisticated that it’s almost impossible to not have absolute control.

“There is MIS (management information systems) like you would not believe. There is a lot of chatter about not being able to control it; that’s nonsense. There is total and full disclosure, and absolute integrity.

“These people realise that they operate in a sort of underground economy, so they have to have control over what’s happening because they have no recourse. They can’t go to court and say ‘someone ripped me off’. They have absolute control over their systems. This is a controllable industry. It’s up to the Government and the regulators to put in the controls. The technology is there to put in whatever type of controls you want.”

Mr Major added: “While the bankers are coalescing to ban and blackball these people, these people are circumventing the system to drive their profits down. Their fees are going because they are no longer getting to make transfers, and they are offering mortgages, so the banks are not getting that business.

“As their rigid requirements grow, theirs  lower. You can’t compete anyway,  because their [web shops] money is money is at zero rate. It’s a bad situation all around if the regulators don’t get a grip on this.”

Mr Major estimated that close to $100 million in mortgages issued by the web shops were not recorded with the Central Bank, and that commercial banks were losing $500,000 in fees a year because fewer people were using them.

He added that web shop operators, as in the case of FML chief Craig Flowers, who recently expanded his web shop business to Haiti, were finding ways to export their capital and create employment in other countries.

Mr Major told the Conclave that there were more than 380 web shops in the Bahamas, with 4,000-4,500 people employed in the industry. “Any of us who would like to pretend it’s not an industry are burying our heads in the sand,” he said.

“It’s an industry that is organically grown in the Bahamas. The latest operators have taken it to another level through technology. It’s real and it’s never going to go away. There will never be enough policemen and enough jails. If you attempt to make it go away you might force it a little deeper underground,. which makes it more dangerous and prone to things you don’t want to see happening.”

Mr Major estimated that web shops collectively generated an annual turnover of $400 million per year, noting that there were some patrons who spent as much as $5,000-$10,000 a day.

“You have white, black, middle and upper class. You have a lot of people who are lower class but play regularly,” he added. “People do win, and they win regularly. The problem is, as opponents argue, some get addicted and they keep chasing that win.

“If everyone was losing no one would gamble. The pay out is around 65-75 per cent. At the end of the day, more lose than those who win, otherwise there would be no industry,” said Mr Major, suggesting that a control measure be implemented for persons with gambling issues and limits be imposed on the amount of times a person could play.

He said the web shop industry paid out roughly $260 million a year, and paid out about $40 million in operating expenses. “They are the first to pay their rent. In fact, they pay in advance by six months, their NIB is current, they pay their staff cash, they pay their bills and they give generously,” said Mr Major.

He added that while the Government could look to tax the $100 million net profit the industry made, it should be taxing the gross.

“I think they should tax the winnings too. The winnings are greater than the margin, and certainly the net. $60-70 million is what the Government could generate in taxes tomorrow from this industry,” said Mr Major.