By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister yesterday reiterated calls for web shop hold-outs to “stop hiding behind the lawyers” and pay millions in taxes due under the industry’s settlement with the government. 

Dionisio D’Aguilar, minister of tourism and aviation, who has responsibility for gaming, told Tribune Business that the failure to-date of four web shop chains to comply with that deal was an “annoying distraction” that all sides needed to put behind them.

Expressing frustration over the “constant haggling”, Mr D’Aguilar argued that it was “unrealistic” for Island Game, Paradise Game, Asure Win and the FML Group of Companies to take the position that no retroactive taxes were owed for the 2018-2019 fiscal year’s first half.

Pointing out that all other Bahamian businesses and individuals were paying taxes, he urged them to “step up to the plate” rather than “hide behind legal technicalities”.

However, Mr D’Aguilar confirmed that the quartet collectively account for just 24 percent - less than one-quarter - of the industry’s total tax bill. The biggest payers, Sebas Bastian’s Island Luck and Ultra Games, together with the Chances chain, generate some 76 percent of the sector’s tax burden and are all currently compliant with the settlement terms.

Mr D’Aguilar spoke out as Carl Bethel QC, the attorney general, said the Government had received a letter on the matter from Wayne Munroe QC, representing all of the web shop hold-outs bar FML, late last week.

Disclosing that he would meet Mr Munroe later this week for further talks on a negotiated settlement, Mr Bethel borrowed a quote attributed to the late UK wartime prime minister, Sir Winston Churchill, that “jaw-jaw is always better than to war-war”.

Both himself and Mr D’Aguilar expressed a preference to resolve the dispute amicably, rather than through costly and time-consuming litigation. Neither would be drawn on when the Government’s patience would run out, although the gaming minister agreed that refusing to renew the quartet’s licences over the tax non-payment was “always the stick in the bag of tricks the Government has”.

“We would always like to have an amicable solution rather than go that route,” Mr D’Aguilar told Tribune Business. “My position is that it is unrealistic for them [the hold-outs][ to think they should not be paying any taxes. Everyone else is paying a tax, and I think it’s their duty to pay a tax.

“Every single individual and business is paying a tax, and they need to pay a tax as well. They should step up to the plate and do that.”

Under the mid-February settlement agreement, so-called “back taxes” for the first half of the 2018-2019 fiscal year - from July 1-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 and 17 percent, with effect from January 1, 2019.

However, Mr Munroe’s clients and FML have yet to comply with these terms some three months later. Tribune Business revealed last month 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.

“It’s an annoying distraction I wish we could put behind is and move on rather than constantly haggling over this tax,” Mr D’Aguilar told Tribune Business. “It’s very frustrating, but it’s really in the hands of the lawyers. If you want to stay behind lawyers and litigate that’s your right, but it’s extremely tiresome.”

The minister declined to comment on when the Government’s patience will run out, and also refused to get into the legal positions the two sides are taking.

Tribune Business previously reported that Mr Munroe and his clients were basing 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.

Mr Munroe 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 for the first six months of the current fiscal year.

However, it is understood the Government believes it has 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 Bethel, meanwhile, revealed that the Government received another letter on the dispute last week from Mr Munroe, who did not return Tribune Business phone calls and messages seeking comment yesterday.

“We got a note from Mr Wayne Munroe,” the attorney general revealed. “We haven’t had a chance to meet with him on it; later on this week we will have a meeting with him.”

Indicating a willingness to be patient, Mr Bethel added: “I guess another week or so is OK. One thing that is not good is to lose patience too quickly with people. It is what it is. 

“We try to avoid the cost and expense and delays of litigation. It’s always better to jaw-jaw than to war-war. That was Churchill who said that, not me.”

Using the old “operator” structure for the 2018-2019 first half will likely generate around $11-$12m for the Treasury based on previous full-year collections of $21m. Given that 76 percent of taxes are generated by the three web shops that are compliant, this suggests that the sum being disputed by the hold-outs is around $5m plus taxes due under the new structure from January 1, 2019.