Wednesday, June 13, 2018
By NEIL HARTNELL
Tribune Business Editor
Web shop advisers have warned that the $101m in annual salary income generated by the sector will be "very hard to replace" if the budget's tax hikes result in mass lay-offs.
A June 2018 report by the Oxford Economics consultancy, commissioned by the Bahamas Gaming Operators Association (BGOA), said the government's plans could undermine its ambitions to develop the country as a "technology hub" and stifle real estate development activity.
The consultants, who performed an "economic modelling" of VAT's likely impact for the Bahamas Chamber of Commerce in 2014, argued that the country's "persistently slow" economic growth and "stubbornly high" double-digit unemployment rate meant it was especially risky to introduce taxes that threaten the web shop sector's present model.
Adding 1,130 'indirect' jobs to the industry's 2,753 employees, Oxford Economics said: "When the full economic impact of the industry is considered, Oxford Economics estimates that domestic gaming supports 3,881 jobs. In a country struggling with chronically high unemployment, these jobs, and the $101 million in income they generate, would be very difficult to replace.
"Moreover, the industry increases GDP in the Bahamas by $284 million. In fact, each gaming employee contributes $103,000 each year to national GDP. This activity, plus taxes paid directly by the industry, generates an estimated $46 million in annual tax payments to the national government.
"The economic impact of the gaming industry is especially important to the Bahamas given the country's persistently slow economic growth and stubbornly high unemployment rate. In our research reports, Oxford Economics forecasts that household income in the Bahamas will remain flat through 2022, and the country's unemployment rate will remain unchanged at over 12 per cent during the next five years, absent steps to accelerate economic growth."
The Oxford Economics report, released by the industry yesterday, said the web shop sector's $284 million contribution "is significant enough to make a measurable difference to the country's entire GDP, increasing it by 2.9 per cent" based on total economic output of $9.79 billion.
Many observers, especially the web shop industry's critics, are likely to be highly sceptical of this analysis as the sector intensifies its lobbying effort against tax increases it says range from 238 per cent to 453 per cent.
The Minnis administration, too, appears to have hardened its stance against any compromise over the Budget tax increases, and is seemingly determined to ensure that the proverbial 'tail does not wag the dog'.
It believes the domestic gaming sector could, and should, contribute much more as a so-called 'sin' industry - especially given the perceived negative impact on many communities and families, especially in the Out Islands, that has resulted in the redistribution of wealth into the hands of a few.
The Oxford Economics report, meanwhile, estimated that the web shop sector currently contributes $35 million in taxes to the Public Treasury directly, with another $10 million produced by its spin-off activities.
Should the tax hikes result in the industry's contraction, the study argued that the 'ripple effects' will spread to sectors such as real estate and construction.
With web shop operators unable to access banks and the mainstream financial system pre-legalisation, many chose to invest their profits in real estate developments and other sectors of the economy - something they continue to do.
"Real estate investments by domestic gaming support an additional 200 jobs, $7 million in income and contribute $15 million to national GDP," Oxford Economics projected.
"Profits from domestic gaming are often channelled into real estate development activity throughout the Bahamas, and projects currently underway or recently completed include residential complexes, townhouses, apartment style and stand-alone homes for middle-class families, plus commercial office and retail space for small, medium and large businesses.
"These added benefits reinforce the importance to the Bahamas of having an industry with local owners who are committed to investing their earnings into the Bahamas."
The web shop industry's opponents, though, are likely to frown at such a conclusion, believing that the sector's principals were able to use their untaxed, pre-legalisation profits to gain an unfair competitive advantage over rival businesses and move into other, legitimate areas of the economy.
Oxford Economics, meanwhile, said the web shops provided 800 jobs on Family Island where "employment opportunities are often limited". It added that the sector's development was also helping to support high-end, middle class jobs that could play a key role in developing Bahamian technology industry.
"In a country anxious to develop its technology sector, the gaming industry already employs an estimated 75 full-time computer network administrators, programmers, web designers and cybersecurity experts, and other information technology workers," the report said.
"Beyond that contribution, nearly 90 more are engaged in financial, compliance and human resource management. For these 165 workers plus the many more operational and supervisory managers, gaming provides an opportunity for career advancement and professional development."