By NEIL HARTNELL
Tribune Business Editor
A senior private sector executive yesterday urged the Government to rethink its decision to make ‘legalised’ web shop gaming VAT ‘exempt’, describing the matter as “a great concern” to other businesses.
Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, called on the Government to “give further consideration” to making web shop gaming Value-Added Tax (VAT) ‘exempt’.
The revised 7.5 per cent VAT Bill lists “games of chance, gambling and lotteries, which fall under the existing Lotteries and Gaming Act, as activities where the new tax will not be levied on end consumers.
While businesses involved in these sectors will be unable to reclaim their VAT ‘input’ payments, Mr Sumner indicated companies in other sectors feel the Government in unfairly discriminating in favour of web shops with this policy.
“A great concern is making the gaming industry exempt from VAT,” Mr Sumner told Tribune Business, directing his remarks towards web shops instead of casinos.
“That is something the Government has to give further consideration to. The gaming sector has been operating in the informal economy for a long time, and is now coming close to legalisation. To make them exempt is something the Government should look at again.”
Tribune Business understands that the Christie administration has decided gaming - both the casino and web shop variety - should be treated as VAT ‘exempt’ because the sector is already taxed under its own special structure.
Mr Sumner, though, said this was no excuse for making web shop gaming ‘exempt’, pointing to numerous other businesses and sectors that will have to pay taxes under their own special structures as well as VAT.
“The fact they’re taxed under other legislation should not exempt them from paying VAT like other businesses,” Mr Sumner told Tribune Businesses.
“Also, with games of chance, web shops have been making large profits from the community for many years. They should pay whatever taxes the Government levies on them. They shouldn’t be exempt from paying VAT even if they’re paying under other legislation.”
Mr Sumner said the new VAT Bill’s ‘games of chance’ definition, in his opinion, included web shops within its ambit.
He added that the Chamber of Commerce had received calls on the issue yesterday from member businesses, expressing concern over the seemingly favourable tax treatment that a yet-to-be legalised industry would receive in comparison to themselves.
Pledging that the BCCEC would seek “clarity” from the Government on the matter, Mr Sumner said web shops should either be legalised, taxed and regulated, or shut down.
With food stores and other ‘productive’ industries now mandated to levy VAT on their consumers, the BCCEC chief executive said it was “only appropriate” that the web shop industry receive equal treatment.
Hotel and casino executives, meanwhile, told Tribune Business that they were still assessing the VAT Bill and accompanying regulatory package, and were not yet in position to give their considered views.
However, Stuart Bowe, the Bahamas Hotel and Tourism Association’s (BHTA) president, said their “primary concern” to minimise VAT’s impact on prices and competitiveness remained.
“BHTA welcomes the adjustment to the VAT rate. We are presently reviewing the drafts with our tourism industry partners to understand the extent to which the concerns and recommendations which we have presented to the Government have been addressed,” Mr Bowe said.
“We hope to meet with Government representatives in the near future for clarification and further consultation. Our primary concern remains – to minimise the impact on price competitiveness and maximise our ability to attract visitors. This has considerable consequences for our industry and the economic well-being of the nation.”
In a statement to BHTA members, which was released yesterday, Mr Bowe said: “While the 7.5 per cent VAT rate, which includes the elimination of the current 10 per cent room tax to then be replaced by the 7.5 per cent VAT, was a welcome change to the original proposed rate, the tourism industry remains concerned about a number of details which, if not addressed, will further impact pricing and competitiveness.
“Specific areas of concern and recommendations were advanced to the Government last month. The upcoming review of the draft legislation and regulations will identify those issues which remain to be addressed.”
These concerns include exempting Promotion Board levies, overseas advertising and mandatory gratuities/fees from VAT. Other issues are ensuring the tax is not levied on advanced group bookings and gross sales.
On the casino front, major operators such as Atlantis and Baha Mar had wanted guest winnings to be ‘zero rated’ for VAT purposes. The Government appears not have gone that far, instead making the sector ‘exempt’, which means it will not be able to recover its ‘input’ tax payments.
The Government is granting ‘zero rated’ VAT status to export industries only, but the tourism and hotel industries have argued that they are, in effect, services industries and should receive the same treatment.
The Government has also gone against the advice of the New Zealand consultants, who in their May 6 report suggested that it not treat casino and all other forms of gaming as ‘exempt’.
Dr Don Brash and John Shewan argued that it was “difficult to justify” exempting gambling from VAT when the likes of food and essential services would be taxable, even if casinos were already subject to their own specific taxation.
They added that levying VAT on gaming would also simplify reporting requirements for Atlantis, Baha Mar and Resorts World Bimini, as their different services would not be subject to different tax treatments.