By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Web shops were last night warned by a Cabinet minister to “get on board and pay your fair share to the Treasury” otherwise their licences will not be renewed if taxes remain owing.

Dionisio D’Aguilar, minister of tourism and aviation, who has responsibility for gaming, said there was no good reason for continued foot-dragging by some operators now that the industry’s taxation settlement with the government had been given legal effect.

He revealed that two web shop chains, which he did not name, had been waiting for the Gaming Board to confirm the “specifics” of the agreement before they began to pay taxes owing for both the first half of the 2018-2019 fiscal year and under the new structure.

Warning that operators may “have a large mountain to climb” if they did not soon begin paying what is owed, Mr D’Aguilar said tax non-compliance would result in the withholding of licence renewals by the Gaming Board.

He admitted, though, that he was unaware of Wayne Munroe QC’s revelation to Tribune Business last week that none of his three web shop clients had signed up to the mid-February settlement with the government that was unveiled with much fanfare by the Minnis administration.

Mr Munroe, who represents the Island Game, Paradise Games and Asure Win chains, said “resolution wasn’t agreed” between his clients and the Government, and that a legal challenge remained a possibility once he had assessed the proposed legal reforms and received their instructions.

Mr D’Aguilar, though, yesterday argued that the tabling of legal and regulatory reforms in Parliament to give effect to the settlement should act as the trigger to “put this behind us and move on” for the benefit of both sides.

“We’ve laid the legislation to concretise what was agreed between legal representatives of the operators and the Government,” Mr D’Aguilar told Tribune Business: “I strongly suggest that every operator begins to abide by these rules and pays the taxes, because these taxes are obviously accruing.

“If they don’t pay them this is a large mountain for them to climb to remain compliant, and they need to receive the necessary licences from the Gaming Board. If we feel they are non-compliant, then we’re not able to issue the licences unless they’re able to pay the taxes.”

While Mr Munroe said Sebas Bastian’s Island Luck and Ultra Games were the only two operators “as far as I’m aware” who had agreed to the settlement terms with the Government, Mr D’Aguilar argued that he did “not see any reason” to drag the issue out any further.

“We should put this behind us and move on,” he said. “Nothing is gained by dragging this on further. The gaming house operators agreed to this. I don’t see why these two have not. I would suggest they get on board and pay their fair share to the Treasury or what they are mandated to pay to the Treasury.”

Mr D’Aguilar said the “two” web shops he was referring to were awaiting “official notification” of the settlement and what they have to pay, adding: “I don’t think there was a disagreement to pay... The Bills should be all the notification they require, and I would suggest they begin to abide by the agreement.

“One or two of them were wanting a letter from the Gaming Board outlining the specifics of the agreement, but I was under the impression everyone has agreed to pay the taxes from July to December and the new tax increases from January to June.

“I think we’ve reached a compromise rather than endless litigation. The agreement with the gaming house operators has been implemented. Let’s move on. We don’t need it to be any more contentious in any way or for this to be dragged on any longer than it has already been dragged out.”

Confirming that he expects all web shops to be current with their tax payments by the 2018-2019 fiscal year’s close at end-June, Mr D’Aguilar said: “I’m led to believe that for the period July 2018 to December 2018, the gaming houses are now paying those taxes.

“So in February they will pay for January and July of last year. Every month they will pay two months to catch up so that by the end of the fiscal year everyone will be current. I don’t know the specific numbers but they are paying the amount calculated. By June 30 they will be up-to-date.”

So-called “back taxes” for the first half of the 2018-2019 fiscal year - from July 1-December 31, 2018 - are to be levied using the web shop’s old taxation rate of 11 percent of gaming revenues.

Mr D’Aguilar previously estimated this will generate around $11-$12m for the Treasury based on previous full-year collections of $21m, which is less than 50 percent of what the Ministry of Finance had projected to earn - $15m “sliding scale”, and $10m from the “patron tax” - during that period.

The Government last week tabled changes to both the Gaming Act and Gaming House Operator Regulations to give effect to the “settlement”, as well as amending the Stamp Act to eliminate the previously proposed 5 percent “patron tax” on customer deposits and over-the-counter lottery ticket sales.

That has been replaced by a “winnings tax”, which was due to be levied from April 1 (Monday) on winnings associated with lottery bets. The changes, which confirm that the tax will only be levied on the actual winnings, provide for the “sliding scale” whereby winnings up to $1,000 will attract a 5 percent rate.

Anything greater will attract a 7.5 percent rate, and the Government expects this to generate $15m as opposed to the initial “patron tax” forecast of $25m. Web shops must submit monthly tax returns, and payment of the operator “sliding scale” and winnings tax, by no later than the 10th of the following month or “the next business day” if that is Sunday.

The operator tax is due to take effect retroactively from January 1, 2019. The settlement, and the Government’s position, has shifted much closer to that taken by the web shop industry in the immediate aftermath of the 2018-2019 Budget’s unveiling, as the operator tax rates now fall into the 15-20 percent range that the sector’s consultants argue represents the global gaming average.

The Government, in unveiling the agreement, said it would reduce its projected take from the “sliding scale” by $15m annually - from the initially projected $50m to $35m - as a result of shrinking the six rates to just two, lower levies of 15 percent and 17.5 percent, respectively. The latter rate kicks in for taxable revenue higher than $24m.

Tribune Business previously reported that Island Luck is the prime web shop industry beneficiary of the settlement since it was virtually the only operator exposed to the higher tax rates under the Government’s original “sliding scale” taxation structure.

It was the sole web shop chain exposed to rates ranging from 30 percent to 50 percent on its gross gaming revenues, whereas five of the remaining six operators would only have faced the lowest 20 percent rate. Chances was the only chain, apart from Island Luck, which would have seen a 25 percent rate levied on a miniscule portion of its revenue.

The bulk of Island Luck’s revenues will now be taxed at 17.5 percent, which is much lower than the rates originally proposed in the 2018-2019 Budget. While its six rivals will largely only attract the lower 15 percent rate, this still represents a 36.3 percent - or more than one-third increase - upon the 11 percent rate they were originally paying. And the five percentage point reduction in the originally proposed 20 percent rate means they will likely see fewer benefits than Island Luck.