By NEIL HARTNELL
Tribune Business Editor
The Bahamas should levy Value-Added Tax (VAT) on all forms of gaming, with consultants urging it to follow New Zealand’s lead by taxing players through the gross sum bet.
Dr Don Brash and John Shewan, in their May 6 report to the Government, called on the Christie administration to abandon plans to ‘exempt’ casino gambling and all other forms of gaming - including potentially web shops - from VAT.
They 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.
Messrs Brash and Shewan 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.
Under the initially proposed 15 per cent VAT model, casino hotels would have been unable to ‘net of’ VAT paid on their inputs in proportion to the percentage of their business accounted for by casino gaming.
In other words, if casino gaming was 30 per cent of annual turnover, a resort would be unable to reclaim or ‘net off’ 30 per cent of the VAT paid on its inputs.
“The draft Bill exempts games of chance, gambling and lotteries from VAT, presumably on the grounds that these activities are already subject to the gaming tax,” the New Zealand consultants said of the Bahamian legislation.
“New Zealand does not exempt gambling activities from VAT. Special provisions of the New Zealand Act deem supplies to be made for VAT purposes when amounts are paid to participate in gambling.
“The practical effect of these provisions is that VAT is imposed on the gross amount bet, less prizes paid out. VAT is payable in addition to casino duty and a problem gambling levy.”
It is unclear whether the Government will adopt these recommendations, and the reaction from those in the private sector is uncertain.
Neither the hotel casinos or web shops (if legalised) will take kindly to paying more tax, especially as they already have their own specific tax structures.
The hotel/casinos, though, will likely welcome the opportunity to recover all their VAT ‘input’ payments, with the burden shifting to players rather than ‘the house’.
Web shops will likely be more unhappy with this proposal, since they have already lobbied for the Government to tax their profits rather than their customers.
The Christie administration has projected that it will earn 0.14 per cent of GDP, or around $11-$12 million, from taxing the web shops this year.
That number is relatively small, likely because only a small number will be licensed, with the taxes probably including a Licence fee; performance bond and 15 per cent levied either on gross or net winnings.
Messrs Brash and Shewan, meanwhile, concluded: “The Mission suggests that the Bahamas give consideration to bringing gambling into the VAT.
“It is difficult to justify exempting gambling if food and essential services are taxable, (one justification may be that the industry is already subject to the gaming tax, but arguments can be made that a consumption tax is justified on top of that).
“A further advantage of subjecting gambling to VAT is substantial simplification of filing of returns by hotels and other businesses involved in the supply of gambling services.”
Elsewhere, the New Zealand consultants said they had been advised that the Central Revenue Agency’s design was “90 per cent complete”.
Some 15 guidance notes had been prepared to deal with how VAT would impact certain industries, and how the transition to the new tax will be handled.
“The guidance notes are of a reasonable standard,” Messrs Brash and Shewan said. “They are brief, however, and will most likely require expansion before being released to address questions that the draft legislation is likely to prompt.
“Further, based on the New Zealand experience, considerable kudos and buy- in is likely to be achieved by having these guidance notes reviewed and commented on by one or two key players in industry groups before they are finalised.”