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Web Shops: Patron Tax 'Making Us Break Law'

Sebas Bastian

Sebas Bastian

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Web shops last night warned the five percent patron tax is effectively forcing them to break the law as they launched their long-promised lawsuit against the Government's tax hikes.

Sebas Bastian, Island Luck's principal, told Tribune Business that the "arbitrary" dates announced by the Ministry of Finance for the levy's introduction on customer deposits and over-the-counter (OTC) lottery sales meant operators were potentially being placed in breach of the Gaming Act and its regulations.

He explained that web shops had been given insufficient time to-certify their games, technology platforms and platforms to accommodate the five percent levy, with the offering of any uncertified games violating the law and potentially "eroding public confidence" in the sector.

Mr Bastian spoke out as Dionisio D'Aguilar, minister of tourism with responsibility for gaming, pushed back against the web shop industry's long-threatened class-action lawsuit, arguing: "The Government has an inalienable right to tax."

The minister confirmed that his ministry had been served with legal documents by the sector's attorneys yesterday, with the matter scheduled to have its first hearing before Justice Indra Charles at 9.30am this morning.

Mr D'Aguilar said the papers listed three plaintiffs, TIG Investments (The Island Game), Paradise Games and GLK Ltd. The defendants are the Treasurer; acting financial secretary, Marlon Johnson; and the Gaming Board as industry regulator.

"I'd been advised it was on its way," the Minister told Tribune Business. "My first response is that the beautiful thing about the Bahamas is this is a democracy, so any person has the right to bring legal action against anybody.

"The Government feels strongly, and I'm sure it's going to be defended vigorously by the Attorney General's Office, that the Government has an inalienable right to tax. These are Acts of Parliament, but I guess if they feel they're unfairly treated they have a right to contest it."

Mr D'Aguilar said the Government had deferred implementation of the 5 percent patron tax several times in response to web shop concerns, and allow them to re-certify their games, but indicated there would be no more extensions.

"We've extended it to the first of September. It's our intention to commence collection of that tax at that time," he told Tribune Business of a levy set to be imposed tomorrow.

Mr Bastian, though, said his main complaint was the lack of due process and meaningful consultation between the Government, Gaming Board and web shop industry over the new and increased taxes.

He argued that Island Luck, and other operators, had "a reasonable expectation" that the Gaming Board would consult regularly with all licensees and "provide guidance in any changes to the carefully and strictly-regulated gaming system".

"I cannot modify my gaming platform unless it is done under the prescribed standards of the Gaming Board, is properly tested and then certified by an independent gaming laboratory," Mr Bastian told Tribune Business. "The Gaming Act and regulations have criminal penalties and civil liability for any breach of their provision.

"The Ministry of Finance has arbitrarily announced unreasonable and impractical implementation dates for the modification of gaming platforms without any consultation with the industry and no proper regard for the statutory requirements for the modification of gaming platforms.

"Any uncertified modifications to a gaming platform would violate the Gaming Act and regulations, undermine the integrity of the gaming industry, erode public confidence and could possible expose our jurisdiction to international sanctions."

Mr D'Aguilar told Tribune Business last month that this was precisely the reason the Government deferred implementation of the 5 percent patron tax - to give the domestic gaming operators the opportunity to have their games re-certified.

The Island Luck chief's comments indicate this was still insufficient, with Mr Bastian last night saying the best-regulated and most competitive gaming jurisdictions all enjoyed strong partnerships between regulator and operators "based on mutual trust and frequent consultations".

"In the Bahamas I expect no less," he told Tribune Business. "It leaves me to question: Why is it so hard to do this the right way?"

The long-threatened web shop industry lawsuit is the next phase of the rift that emerged with the Government after it imposed a new tax structure, together with higher rates, on the sector in the 2018-2019 Budget.

Alfred Sears QC, the Bahamas Gaming Operators Association's attorney, in a furious post-Budget counter-attack told the Minnis administration that the tax increases were so "drastic" that the government's main motive appeared to be "expropriation" of the domestic gaming sector - meaning that it was seeking to seize, and take over, their property.

He warned that the increases will "decimate" all operators and 3,000 jobs in less than a year, and accused the Government "expropriatory, discriminatory, excessive and penal" tax rises of up to 355 percent.

Mr Sears also added that the proposed "sliding scale" tax structure the Government was imposing on the industry was tantamount to "compulsorily acquiring more than 90 percent" of its revenue.

Studies commissioned by the industry, while retreating slightly from those numbers, still predicted mass web shop location closures, lay-offs and reduced economic activity. Many of the threatened closures, though, have yet to materialise.

"I'm delighted they haven't made any mention of that for a while," Mr D'Aguilar told Tribune Business of the forecast downsizing, although he declined to comment further.

The Minister previously told Tribune Business that The Bahamas' "national interest" demanded that the government "slow down the rate of growth" in web shop gaming through increased taxation.

He said too many Bahamians are "robbing their livelihood" to feed an industry whose gross gaming revenue (GGR) will have almost doubled in just four years if 2018 forecasts prove accurate.

The minister, who has responsibility for gaming regulation, reiterated his belief that a web shop sector generating around $50m in collective profits would be able to absorb the tax hikes more easily than it is letting on.

Pointing to the 92 percent top-line growth forecast to be enjoyed by the web shops since 2014, Mr D'Aguilar said this $100m-plus revenue rise was evidence that the sector had been able to shrug off a much greater trauma - the impact of its legalisation four years ago.

"The gaming industry is growing so exponentially," he told Tribune Business, pointing out that web shops' collective GGR had increased from $112m in 2014 to $154m in 2015, representing a $42m year-over-year increase in the first year of legal operations.

Mr D'Aguilar added that the industry's revenues had grown by around $20 million "every year thereafter", hitting $175 million and $195 million in 2016 and 2017 respectively, with projections of similar growth to $215 million for 2018 (prior to the Budget's tax changes).

"It's almost doubled in four years," the Minister said of GGR. "It's in the national interest to slow down the rate of growth. We don't want people to keep throwing money into this.

"People clearly want disposable income to put into gaming. They're robbing their livelihood, quality of life, in order to feed this past-time."

Under the web shop industry's new sliding scale tax, those operators earning up to $20m in revenue will be taxed at a rate of 20 percent. Six of the seven chains fall only within this bracket.

Revenues falling between $20m and $40m will be taxed at a rate of 25 percent, while earnings between $40m and $60m will be taxed at a rate of 30 percent.

Revenues between $60m and $80m will attract a rate of 35 percent; those between $80m and $100m, some 40 percent; and those over $100m will be levied at 50 percent.

Comments

birdiestrachan 2 weeks, 5 days ago

The same people who are gambling now, always gambled. if the FNM Government say gambling is so bad. They are free to close every single one down. I dare them to do just that. Close them down revoke their licence. they the FNM has the power,

Mr: Bastian if you intend to break the law. Why are you talking it.??

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ThisIsOurs 2 weeks, 5 days ago

Hehe the illegal gambling people saying someone forcing them to operate illegally....where Tal lol

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Porcupine 2 weeks, 5 days ago

A signal that our country, it's democracy, and our well-being is on the downward slide. That the web shop owners have ANY say in this country's affairs, shows that we don't have far to fall. We are close to the bottom now. The addicted poorest WILL start stealing, more. Armed robbery WILL increase. Unemployment WILL remain a huge problem. Poverty WILL increase. Homelessness WILL increase. Murders WILL continue to plague us at too high a rate. This, due to the rapacious greed of a few, killing a group of people as surely if they used a gun. This whole affair, and the amount of very valuable time this country has wasted on it, is not a positive sign that this country has a future to be happy about.

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JohnDoe 2 weeks, 5 days ago

Are you referring to the gaming operators or the Bahamian commercial bank that the Minister of Housing just confessed is actively enticing, seducing and preying upon poor Bahamians to take out salary deducted loans they cannot afford so that they can spend the proceeds of these loans with their merchant class friends?

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Porcupine 2 weeks, 4 days ago

Is it either or? It's both of them, yes?

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John 2 weeks, 5 days ago

This is a good test case to see if Government should really be using taxes as a whipping tool to punish businesses that are successful. And of course the irony of Mr. Superwash, Vincent D’Dguilar who owns 90 percent of the clothes washing business be caught up in the middle of it all. Should government impose an outright moratorium on Superwash opening any more stores until other wash house operators gain 20 percent of the market or should they charge a patron tax at all stores he open in addition to the ones he now operates. Maybe the government should charge a 2 percent monopoly tax on Superwash or a sliding scale tax in addition to the taxes they now pay. See how ridiculous it’s sounds Vincent, when it is applied to your own industry? And you have generation money. What about the web shops that are just starting out? And of course, since legal web shops are a new product in the country, business is a booming and yes, some may appear to be making a killing. But what about four, five years down the road when web shop gambling becomes a regular part of the landscape and sales start to decline. The operators will have to use some of the same profits they are making now to rebuild and rebrand the industry. You know more than anybody else, D’Aguilar, that Bahamians don’t like washing in no ole break down machines and you are able to keep your market share by refurbishoyour laundromats every so often and giving the Bahamian people, at least your customers, new toys to play with. What y’all and Minnis dem should be doing now is be using the web shop dem and your own Superwashes dem along with Super Value as models to get the rest of the Bahamian economy going. Stop listening to them racist who telling you ‘dad too much money for dem (Black) gambling boys to be handling. Cause they surely don’t have a problem with how much money the traditional casinos (Paradise and Cable Beach). Bimini Brooklyn? Handling. On Vince happy customs duties on washers and dryers still!

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joeblow 2 weeks, 5 days ago

Is there a time when they were not breaking the law?

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BahamaPundit 2 weeks, 5 days ago

FAAAAAKE NEEEEWS!!!! THIS ENTIRE TAXING OF THE WEBSHOP IS FAKE NEWS. IT'S A HOAX. THE FNM NEVER EVER EVER INTENDED TO TAX THEM. IT WAS JUST A RED HERRING. I CALLED THIS AS SOON AS I HEARD ABOUT THE PROPOSED TAX AND IF YOU LISTEN TO THE NEWS YOU WILL SEE THAT THE GOVERNMENT HAS ALREADY STOPPED THE TAX. THIS TAX THE WEBSHOP SCHEME WAS JUST TO RUN INTERDERENCE WHEN THEY PROPOSED THE 12% TAX ON US. SO DISHONEST. SO OBVIOUS -- COUNT D'AGUILAR EVEN INTENTIONALLY SABOTAGE D THE CASE BY MAKING A PRESS RELEASE THAT SHOWED BLATANT ANIMOSITY AND PREJUDICE. THAT WAS ALL STAGED FOLKS!!!

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BahamaPundit 2 weeks, 5 days ago

THE FNM ARE FAKE NEWS IDIOTS: THE DESTROY THE SHANTYTOWNS WAS FAKE NEWS -- NEVER DID IT. THE CAPITAL PUNISHMENT ANOUNCEMENT WAS FAKE NEWS AND THE TAX THE WEBSHOPS WAS FAKE NEWS. THEY KNOW WHAT TO DO -- A NATIONAL LOTTERY WOULD OVER NIGHT MAKE WEB SHOPS NEARLY OBSOLETE. BUT THEY DON'T DO IT BECAUSE THEY LIKELY HAVE OWNERSHIP IN THE WEBSHOPS. FOLLOW THE MONEY FOLKS, NOT THE WORDS!!!

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ThisIsOurs 2 weeks, 4 days ago

Interesting. It's the first thing I thought as well. I thought the sliding scale was a slight of hand too, meaningless without telling us where on the scale the operators actually fell. But I don't want to stay to long in conspiracy theory land, I actually told someone today that when the tax is actually implemented only then will I believe they intend to tax them.

This is like Deja vu from January 2013. "Shut all webshops down!". Oh there's an injunction? Ok carrying no smartly...

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DDK 2 weeks, 4 days ago

It's beginning to look like you are right. It is SO obvious that these gambling houses are destroying what's left of our economy and society. Birdiestrachan is right that Government CAN close the gambling houses and clean up the shanty towns if it actually had a mind to so do.

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BahamaPundit 2 weeks, 4 days ago

Yep. I don't mind living in conspiracy theory land, because Bahamian politicians are such corrupt liars, you have to. None of them are truth seekers. None of them want to stop crime, want freedom of information, want campaign finance reform. When you see a continual trend of "wrong minded" people in office, what else can you do. How many times will this Attorney General lose in court? He loses to everyone and on everything!!! Why is he even there?

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BahamaPundit 2 weeks, 4 days ago

Idiot millionaires. Doesn't sound right. Not easy to become a millionaire. So, these dudes make rules to tax the webshops without first having their lawyers check the laws. Remember, the FNM have a majority and can change any law they please. They could easily ensure that the Gaming Act provides for sliding scale taxation. When you see millionaires making idiotic mistakes, mistakes they would never make with their private affairs, one has to think something else is at play. One has to know that these men are corrupt and giving us the people Fake News about taxing the web shops and getting rid of shanty towns.

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John 2 weeks, 4 days ago

If the Minnis led FNM administration was to lose the government today there are several MP’s and other government appointees who can easily find themselves before the courts. Not necessarily because of corruption or mismanagement in office but because of the sloppy and unprofessional manner they are actually handling the people’s business. And of course the Web shops fiasco will be among the top of the list. Why so much excessive taxes on black owned Bahamian web shops and not a fraction of a percent increase in taxes on the foreign owned casinos. Ok wait now, they changed their word and now say they needed to control the growth and profitability of the web shops. Originally they said the government was broke and needed additional revenue. Then this over-the-hill empowerment project. (Aka Urban Renewal 3.0). Exactly who will benefit from it and who is the intended target? It appears like, with their housing program, little or none in The projected areas will qualify. So businesses, especially, in those areas will find themselves at a greater disadvantage having to fight against New money and new businesses. And the red tape for homeowners in areas may not fare much better. Then while government is claiming to have removed customs duties off clothing and shoes, again it only giving the exemption to businesses that are current on all their taxes. Yet thei claim is they realize the number of clothing and shoes stores that are going out of business and this is to help them. So the stores that were struggling all along now have to compete against the bigger stores that pay no duty while they still have to pay. Even the UBP never exercise this level of economic discrimination, and so blatantly. Then there’s the Lucayan hotel in Freeport... was this the best option for government to buy it with the possibility of having to spend millions to get it market ready and open? Wouldn’t it have been better to get a company, like Wynn, or some other hotel operator to the table and government make a one time spend to secure the sale of the hotel to them and let them do the repairs and operate the hotel? And the people of the Southern Bahamas in the main time say they have been totally ignored after hurricane devastation. Then there’s the total melt down of the BEC board. What is the real reason behind it? And let’s not forget Oban? And these black hawk helicopters buzzing sleeping communities and claiming to be looking for drugs and drugs dealers. Roads are still in shambles. Bahamas air at least two weekends of 16 hours flight delays.. a new record? National Debt still climbing So what then are the successes of this government. Well they did take the burden of carnival off the tax payers backs. The murder rate continues to by down but may still be double digit.

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TalRussell 2 weeks, 4 days ago

Ma Comrades, me holding back my complete outrage blow me cool over whole media play interaction between Imperial red shirts crown members cabinet...... that is until KP and Carl Wilshire - signs off allow government employees open Payroll Deduction Accounts at Numbers Houses.... Any reason we government should be allowing Numbers Players be opening Deposit Accounts at Gambling Joints.... that iis unless we elected MP's - done lost all they common sense marbles.

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TheMadHatter 2 weeks, 2 days ago

"...with the matter scheduled to have its first hearing before Justice Indra Charles at 9.30am this morning."

THIS MORNING??? Wow.

I overheard two fellas in the food store last week. One said he been waiting 7 months for a court date.

Dese mussy know somebody in schedule clerk office eh? :-)

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TheMadHatter 2 weeks, 2 days ago

John.Doe - i did not read the comment - so i don't know which bank he meant BUT there is a certain bank which is generally known as a "predatory lender."

Everyone knows about them because everyone knows someone friend or family who has been scr3₩ed by this bank. Yet all those Bahamians who know still maintain accounts at this bank thereby holding them up in their endeavors.

Bahamians eat their own and deserve to be taken over by foreigners. No patriotism.

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