By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government will this week seek to heal Gaming Board "divisions" to pave the way for resolution of the web shop taxation dispute in time for the new fiscal year.

Carl Bethel QC, the attorney general, revealed to Tribune Business that "a framework for a substantive agreement" due to be implemented in early July had been agreed between the government and the four web shop tax "hold-outs".

He added that the focus was now on "satisfying" the Gaming Board, the web shop industry regulator, and "resolving some differences within" it so that the settlement with the web shops could take effect the week after this to coincide with the start of the 2019-2020 fiscal year.

Dionisio D'Aguilar, minister of tourism and aviation, yesterday clarified that the Gaming Board's concerns had nothing to do with web shop taxation. Instead, he said they related to broader reforms to the Gaming Act and Gaming House Operator regulations that the government wanted to implement as part of a wider package alongside the taxation settlement.

The minister, who has Cabinet responsibility for gaming and its oversight, backed Mr Bethel's early July timeline for the latest settlement to take effect but cautioned that he would "be in a better position to advise you at the end of the week" whether it is going ahead as planned.

Neither he nor Mr Bethel gave any details on the settlement's content, but Mr D'Aguilar added that its implementation would create "certainty" for both the Government and industry, adding that the proposed resolution involved no changes to the two web shop operator tax rates or the overall structure.

He spoke after Mr Bethel confirmed that resolution was within sight, with the Government now aiming to ensure "all bases are covered" so that implementation of the agreement thrashed out with Island Game, Paradise Game, Asure Win and the FML Group of Companies - and their legal representatives - can take effect.

"We're making progress towards a substantive agreement," the attorney general told Tribune Business. "It's a question of tying up some loose ends. There's a division of opinion at the Gaming Board, and we hope to have that resolved next [this] week.

"We have agreed the framework already; it's just making sure we have all the bases covered. That's a question of resolving some differences within the Gaming Board. There is a basic agreed framework and timeline to implement it after the Budget debate in the early part of July.

"We will bring forward the suite of reforms that have been basically agreed, and will have a settled situation with gaming revenue. We are looking forward confidently to that, and will ensure all pieces are in place and that the regulator is satisfied."

Mr Bethel said there was "broad acceptance" from the web shop industry over the settlement agreement, although he conceded there may be some isolated "stragglers" and attorneys eager to continue the dispute.

"The web shop owners are largely on board," he told this newspaper. "I am sure there may be some lawyers wanting to make their living out of disunity, but there's broad acceptance as far as I'm aware.

"We'll see what happens after the suite of legislation. I'm sure there will be stragglers, but the law is clear: Once settled law is passed, taxes must be paid."

The Government initially believed that all web shops were on board with the mid-February 2019 settlement agreement to resolve their dispute over the industry's new taxation structure. However, Island Game, Paradise Game, Asure Win and the FML Group of Companies took the position that no retroactive taxes were owed for the 2018-2019 fiscal year's first half.

Under that deal, so-called "back taxes" for the first half of the 2018-2019 fiscal year - from July 1 to December 31, 2018 - were to be levied at the old web shop taxation rate of 11 percent of gaming revenues. This was replaced by the new "sliding scale" operator tax, and its new rates of 15 percent (for revenues under $24m) and 17 percent (for over), with effect from January 1, 2019.

Tribune Business subsequently revealed that Paradise Games and Asure Win had paid taxes due for July 2018 and then stopped, while FML and Island Game had yet to pay anything at that point.

The quartet based their case on the fact that the old taxation structure, which required web shops to pay the greater of 11 percent of taxable revenue or 25 percent of earnings before interest, taxation, depreciation and amortisation (EBITDA), was repealed when the 2018-2019 budget was passed at end-June 2018.

The attorney for three of those operators, Wayne Munroe QC, told this newspaper in late December 2018 that, as a result of that repeal and the attorney general's previous undertaking not to enforce the new regime after the industry took the matter before the Supreme Court, no taxes were due or owing by the sector - either for the first six months of the current fiscal year, or subsequently.

However, the Government felt it had a solid legal position to demand the payment of retroactive or "back" taxes under the settlement agreement's terms by virtue of the Interpretation and Clauses Act's section 22.

This allows a repealed law, such as the old 11 percent taxation structure, to remain "in force" until the one replacing it takes full effect. "Where any written law repeals in whole or in part any other written law, and substitutes other provisions therefore, the repealed written law shall remain in force until the substituted provisions come into operation," the Act states.

Mr D'Aguilar yesterday confirmed that the Gaming Board's concerns related to proposed changes to legislation and regulations governing the web shop industry, rather than the taxation dispute settlement.

He revealed that the Government had sought to address all "glaring deficiencies" in the sector's regulatory structure simultaneously with resolving the taxation issue, and was now "hashing out" the differences between the Gaming Board's position and that of the industry.

"We made the review of gaming legislation more comprehensive," Mr D'Aguilar told Tribune Business. "We said: 'While we're here, what are the other issues?'. It's nothing to do with the rates; the rates of taxation, and the mechanism of taxation.

"It's other parts in the Gaming Act and the Gaming House Operators regulations. We've asked the regulator and gaming house operators if there are any other glaring deficiencies that we need to tackle when we go to the well?

"The industry might say one thing, and the regulator will say another. The important thing is to get them in the room and iron out any differences. We are getting the legislation together, and as you do with any review of legislation you consult everybody. The industry has their position, the regulator has their position, and you have to get them together and hash everything out.

"We're trying to sort that out, We're trying to improve the Act we have. When you review legislation you try to take care of other issues as well within the process."

Mr D'Aguilar did confirm that the taxation settlement involves no further changes to the mid-February deal, which reduced the number of rates imposed on operator revenues from six to two - 15 percent and percent.

He added that some of the four web shop "hold-outs" had been placing due tax revenues in escrow, and were waiting for the settlement agreement to be finalised before they released them to the Public Treasury.

"Some have been putting it aside, waiting for clearance from legal counsel to pay," Mr D'Aguilar said. "We're trying to iron out all the issues of the terms of the agreement, and will trigger the payment once we get that done.

"It [the settlement] would bring some certainty to the process, and everybody would now know the lay of the land, and the regime under which they operate." In other words, the web shop industry will be able to focus on running its operations, and the Public Treasury on collecting due revenue, given the tax structure predictability.

The Government has still been collecting the majority of its revenues, though, as the three compliant operators - Sebas Bastian's Island Luck and Ultra Game, and Chances - are said to account for 76 percent or three-quarters of the sector's tax base.

Based on this, and the fact the Government would have collected $11m in half-year revenues from the sector under the old taxation structure, only $2-$3m in revenue is outstanding for the six months to end-December 2018 - something confirmed by Mr D'Aguilar yesterday.

He last week said the Government still anticipates collecting $50m in taxes from the web shop sector annually, split between $35m paid by the operators and $15m from the new levy on patron winnings.

However, the 2019-2020 Budget estimates show just over $16m in "gaming house taxes" for the new fiscal year - a figure that changes little for the next two periods. Total gaming taxes, including sums paid by the hotel-based casinos, are pegged slightly above $36m.