The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Web shop operators have agreed to pay the Government retroactive Business Licence-type taxes on their Freeport operations despite believing they are ‘exempt’ from such levies under the Hawksbill Creek Agreement.

Alfred Sears QC, attorney for the Gaming House Operators Association, told Tribune Business that this concession was part of the agreement reached between the industry and the Government to resolve the contentious ‘back taxes’ issue.

And, while compromising on the ‘Freeport’ issue, the web shop operators were still able to achieve what was likely their main aim, that of getting the Government to calculate taxes owed on the basis of ‘adjusted gross revenue’ - the international gaming industry standard.

“The Freeport issue was one where the industry’s position was that, under the Hawksbill Creek Agreement, the exemption [from Business Licence fees] should be applied as they were licensees of the Grand Bahama Port Authority (GBPA),” Mr Sears told Tribune Business.

“The Government did not accept that, and certainly the position of the industry was otherwise.”

It is unclear if the web shop industry’s decision to pay six years’ worth of ‘back’ Business Licence fees to the Government for their Freeport operations sets any kind of precedent, legal or otherwise, with Mr Sears saying both sides moved swiftly to settle the taxation issue in the interests of “practicality”.

Tribune Business previously revealed that apart from ‘Freeport’, the gaming industry had two other key concerns over the Government’s approach to calculating its ‘back taxes’.

These were how the Gaming Board was defining ‘gross revenue’ in relation to the web shops. It originally based due retroactive taxes on ‘gross revenues’ and ‘gross profits’, rather than ‘gross adjusted revenue’ - the benchmark that the sector argued was the internationally-accepted norm.

And the Government’s also sought to base ‘back’ or ‘retroactive’ taxes on Business Licence fees, when the Bahamian gaming industry (casinos) have traditionally been exempted from this tax.

Mr Sears yesterday confirmed that while the Government had granted the first of these web shop gaming industry demands, it held firm on the Business Licence issue.

“The resolution is that there will be a disclosure of gross turnover during the review period of six years, and the tax will be in accordance with the international standard, which is gross adjusted revenue,” Mr Sears told Tribune Business.

The industry had feared that the Government’s original plan would effectively tax players’ wagers - not the web shop operator’s gross revenues.

Multiple Tribune Business sources had explained that the worldwide gaming industry was taxed on ‘adjusted gross revenues’, which is the difference between a player’s wager (sum bet) less the winnings he/she takes home.

The difference is the revenue upon which the web shop operator gains an economic benefit from, effectively representing his gross revenue.

As an example, a player can wager $100, engage in gambling activity that generates sums up to $5,000 but, in the end, only walk away with $20 in winnings. The web shop operators are thus arguing that it is the $100-$20 difference, $80, that represents their ‘adjusted gross revenue’ and what they should be taxed on, not the $100.

Mr Sears said the web shop industry was “not entirely pleased” with the outcome, but added that it was “a very practical resolution that is consistent with international practice”.

He added: “Certainly, my sense is the industry did not get much of what it wanted but, in the interests of practicality, felt the resolution was reasonable to move the industry forward.

“There were other proposals more favourable to the industry. I can’t say the industry is entirely pleased, but in terms of practicality, finality and moving the process forward, they consider the solution to be reasonable.”

Mr Sears declined to detail what the “more favourable proposals” were, but indicated that the web shop industry dropped its Business Licence ‘opposition’ in return for the Government agreeing to the ‘adjusted gross revenue’ calculation basis.

He added that there had been “tough negotiations” between the Government, web shop operators and casinos, with all parties realising that “a practical and reasonable position” was the only way to move the process forward.