By NEIL HARTNELL

Tribune Business Editor

and NATARIO McKENZIE

Tribune Business Reporter

Web shops yesterday slammed the Minister of Tourism’s “reckless” attack on the sector’s taxes and regulation, charging he was “out of touch with the industry he supervises”.

The Gaming House Operators Association, in a statement issued to Tribune Business, argued that the web shop industry already paid a tax rate nearly triple that levied on hotel-based casinos.

Arguing that its members “pay more in taxes than Atlantis, Baha Mar and Resorts World Bimini combined”, the Association said that unlike its hotel-based counterparts the web shops enjoyed “not a penny” in tax breaks and incentives in return.

Responding to Dionisio D’Aguilar’s House of Assembly address, in which he described the eight licensed web shops as “a cartel” due to the 10-year bar on new entrants, the Association suggested the Minister and the Minnis administration could not be trusted to honour previous commitments.

Describing the Minister’s stance as “chilling”, it argued that his comments demonstrated why the Bahamas continued to attract little domestic and foreign direct investment (FDI).

Besides taxation, Mr D’Aguilar had also suggested that the web shop sector was endangering the wider financial services industry’s integrity by functioning as unlicensed money transmission services providers without the necessary Know Your Customer (KYC) regime.

The Association yesterday pushed back hard on this angle, arguing that Mr D’Aguilar’s comments did not match “the facts”. It sought to turn the tables on the Minister by arguing that he was the one threatening “considerable harm” to the web shop gaming industry and, by extension, wider Bahamas.

Blasting Mr D’Aguilar’s address as “unfortunate, reckless and factually incorrect”, the Association told this newspaper: “As an industry that currently pays more in taxes than the three major casinos combined, it is unfortunate that the Minister with responsibility for gaming appears out of touch with the industry he presumes to oversee.

“If the Minister would have availed himself of the facts, he would know that the local gaming industry pays more in casino taxes than Resorts World Bimini, Atlantis and Baha Mar combined.

“Additionally, we would like to add that unlike these casinos we have not received a penny in concessions from the Government. However, unlike those three major casinos, the local gaming operators are forced to pay 13 per cent in taxes, while Baha Mar, Atlantis and Resorts World enjoy a mere 5 per cent fee.”

Gaming house operators are currently required to pay 11 per cent of their taxable revenue or 25 per cent of earnings before interest, taxes, depreciation and amortisation (EBITDA), depending on which one is greater.

Mr D’Aguilar on Wednesday suggested that the Government was examining whether to impose new and/or increased taxes on web shop gaming, given the “eye popping” profits being generated by the eight operators.

“With the gaming houses being so cash rich, and the Government so cash-strapped fulfilling its requests for social services and education, I am sure the Minister of Finance will be looking to enhance his tax revenues from the sector,” the Minister said.

While not denying the “eye popping” profits, the Gaming House Operators Association yesterday expressed concern that the sector was being singled out, and discriminated against, when no other industries were subject to increased taxes solely because of large ‘bottom lines’.

“We find it concerning that the Minister would seek to justify an increase in taxes due to our profitability, when the same rationale is not utilised for the fuel industry, the alcohol industry or any other private entity,” it argued.

The Association also pointed out that web shop operating costs had automatically increased by 7.5 per cent as a result of being treated as Value-Added Tax (VAT) exempt, meaning they cannot offset tax paid on their ‘inputs’ since it is not levied on customers.

This tax treatment, it added, differed from the hotel casinos who do collect VAT from customers on the Government’s behalf.

The Association then implied that Mr D’Aguilar had undermined the industry’s confidence in his ability to be an impartial regulator by describing it as a ‘cartel’.

“It is unfortunate to have someone presiding over an industry that he clearly does not support, but it leaves little doubt when the Minister refers to the industry as a ‘cartel’,” the Association said.

“This type of inflammatory language is unbecoming of a Minister of the Government, and sends a clear and chilling message that any agreement made with the Government can be changed on a whim. We have already seen this with Baha Mar, and it is no wonder that investors are apprehensive about putting their money in the Bahamas.”

Mr D’Aguilar has long held the position that the 10-year moratorium, which blocks any new operators entering the web shop industry until 2027, is anti-competitive and should never have been permitted.

The eight licensed operators, though, argue that the moratorium is just reward for their efforts, and that new entrants not should reap the benefits of their work in helping to legalise, regulate and tax the web shop sector.

Their stance is that the bar is necessary to prevent the industry from becoming over-saturated, and to allow existing operators to adjust to a regulated environment with higher costs and taxes.

The Association, meanwhile, added that Mr D’Aguilar had failed “to avail himself of the facts” in relation to both the industry’s customer due diligence and role as unlicensed money transmission providers.

“Since the implementation of the Gaming Act 2014, the local gaming operators Association has followed all KYC (Know Your Client) rules, and have all the required documentation on its patrons,” it said.

“Likewise, with respect to comments made by the Minister on money transfer services, that information is readily available but has never been requested by the Minister.”

The Association did not specify what “information” it was referring to, but concluded by warning that Mr D’Aguilar’s remarks “could cause considerable harm to the industry and the country at large”.

Individual web shop operators spoken to by Tribune Business yesterday were equally concerned by the potential fall-out from Mr D’Aguilar’s remarks, one saying of the Government: “I think they want to penalise us”.

In an e-mailed response to this newspaper, the operator agreed that while there was need for additional enforcement reforms, they were vehemently opposed to new or increased taxes.

“There are many things relative to this industry that the current government needs to look at,” they said. “I would not accept that additional taxes is one of them. I can’t say that I agree with that. I think that we are being taxed enough already.

“I have all of these fees that I have to pay, staff to pay, National Insurance to pay...... I don’t see the need for more taxes, honestly, and I don’t think it’s fair for the Government to be looking to tax Bahamian-owned and operated businesses that employ Bahamians out of business.

“If they want to talk with us about how to improve the industry and that sort of thing, let’s sit down and talk, but this industry can’t be looked at as a cash cow. I feel like because of all of the stigma surrounding the industry, I think they want to penalise us.”

Another web shop operator told Tribune Business: “Maybe the higher taxes is the Government’s way of restricting the proliferation of local gambling. I am totally of the belief that the local industry is beyond the capacity of the discretionary income of the population. There are too many gambling outlets for a population of this size.”

His concerns echoed those of FML Group of companies founder, Craig Flowers, who has previously told Tribune Business there are too many “outstanding issues” facing the industry that have yet to be resolved, including the permitted number of web shop locations and locations per operator, plus zoning enforcement.