Web shop 'cart before horse' may cost $40m


Tribune Business Editor


LicenCed web shops last night branded the five percent patron tax's imminent introduction as "putting the cart before the horse" due to the Government's failure to combat illegal operators.

The Bahamas Gaming Operators Association (BGOA), breaking its silence on the issue, warned that the sector could lose a collective "$40m in taxable revenue" to unregulated, non-tax paying competitors who now stand to attract greater market share.

In a formal statement, the association said it was "eager to see" how the Government planned to fulfill previous pledges by Carl Bethel QC, the Attorney General, to deploy the authorities "full arsenal" to "dig up" unlicensed gaming operators.

It also pointed to admissions by Dionisio D'Aguilar, the Cabinet minister responsible for gaming, that the Gaming Board was unable to act against unlicensed operators without the Royal Bahamas Police Force's (RBPF) involvement as an indication that the Government may find it difficult to meet the Attorney General's promises.

"To impose a patron tax on licensed, regulated gaming operators in this uneven playing field - against the backdrop of regulatory failure on the part of the Government - is putting the cart before the horse," the Association blasted.

"The Government should have worked to solve the problem of the unlicensed, unregulated, 'black market' before implementing any new taxes. The proverbial question is: 'How do we protect our patrons from such a migration to the unregulated market without any regulatory oversight and the unintended consequences that may arise?"

The 5 percent levy on patrons' account deposits and over-the-counter (OTC) lottery sales is due to take effect within 48 hours from September 1, despite fears among licensed web shop chains that many customers will simply seek to avoid the tax by switching to unregulated operators.

"Numerous independent experts have concluded that the new patron tax will drive 30 percent of the market to unlicensed, unregulated gaming operators, who will not be paying taxes and who are not subject to the same anti-money laundering and counter financing of terrorism (AML/CFT) standards," the Association said. "This migration will ultimately result in a $40m loss of taxable revenue.

"As the industry hurries toward the implementation of the new 5 percent patron taxes, now is the time for the Government to consider both its failure to adequately enforce the law and the consequences of the new ill-conceived, unfair tax regime.

"These new taxes will not yield the returns the Government has projected, and will drive customers to the existing unlicensed, unregulated, 'black market'. As this unlicensed, unregulated, 'black market' continues to grow unabated, so too does the risk of international sanctions, which could harm the financial services sector and further damage the reputation of The Bahamas."

Mr D'Aguilar this week conceded that the continued operation of the Bet Vegas web shop chain, in particular, was "woefully unfair" to rival licensed web shops because it was creating "an anomaly in the market".

That operator was refused a licence when the sector was legalised in 2015, prompting Bet Vegas to challenge this decision in the Supreme Court via a Judicial Review action. It also obtained an injunction to prevent the authorities forcing its closure, and both matters remain live today - enabling it to block any action by the Gaming Board or police.

The Association, meanwhile, said it was still awaiting the study commissioned by the Government on the industry's new sliding scale tax structure that was imposed in the May Budget. Emphasising that it was not opposed to any new or increases taxes, it added that it was only against changes that occurred without consultation and proper empirical analysis.