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Ex-Minister 'Totally Opposed' To Web Shop Taxation Hike

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The ex-Cabinet minister who oversaw the web shop industry's legalisation yesterday queried why it was being hit with "destructive" taxation despite meeting all its obligations to date.

Obie Wilchcombe, the former minister of tourism, told Tribune Business he was "totally opposed" to "penalising" the sector with a huge taxation increase, and attacked the Minnis administration's "retrogressive" plan for "taking the country backwards".

Backing the domestic gaming industry's arguments, Mr Wilchcombe said it was one of the few government revenue sources to have "proven to be a stellar performer" since the 2015 legalisation.

He argued that the government's approach to the web shops had been clouded by both politics and an instinctive dislike of the gaming activities it facilitates.

While calling no names, Mr Wilchcombe said the Cabinet contained several ministers who had been opposed to the web shop sector's legalisation prior to taking public office.

And he suggested that some in the Free National Movement (FNM) believed the sector's removal from the "informal economy" had created a group of wealthy "political players" able to provide the Progressive Liberal Party (PLP) with significant financial support.

Vehemently denying this was the case, or that it motivated the former administration's policy towards the web shops, Mr Wilchcombe said of the proposed "sliding scale" tax structure: "totally opposed to it. It takes us backwards as opposed to taking us forwards.

"What I find incredible is that the Minister [K P Turnquest] did not stand up and say they're not paying paying their taxes. He did not have reason to penalise them because they are paying."

Mr Wilchcombe added that Mr Turnquest, in his mid-year Budget communication, identified gaming - together with Value-Added Tax (VAT) and the Road Traffic Department - as three areas that had produced revenue growth during the 2017-2018 fiscal year.

"They have been proven to be stellar with their performance, and are living up to their obligations," he told Tribune Business. "Why target them, and put in taxation that destroys them and sends them underground? It's destructive, and against the intent behind their legalisation. Why take this approach? Why seek to penalise them and seek to damage what exists today?"

Mr Wilchcombe hit out after research commissioned by the web shop industry suggested that the Government's aggressive double-digit tax hikes will force the sector to cut 2,000 jobs and 75 per cent of its locations.

The study, conducted by 10-year gaming industry veteran and accountant, Gavin Hamilton, argued that the Government's tax take from the increased rates would be $35 million less than anticipated due to one-third of the sector's customer base shifting to 'underground' gaming,

The Government is projecting that it will double its total gaming revenues to just over $70 million in the 2018-2019 Budget, with virtually all this increase generated by the new domestic gaming tax structure. The Hamilton study, though, suggests there will be no increase in the sector's contribution to the Public Treasury - and it might even decrease.

"We sat and had long, arduous meetings with the gaming industry," Mr Wilchcombe recalled. "We arrived at a number to tax the industry, as we did with the casinos.

"We arrived at an arrangement, and they indicated that the investment they'd made would take a while to grow, and as it grew the country would be better off from taxes and other revenues."

He pointed to the 2 per cent of turnover that web shops must currently contribute to community causes, including sports and cultural activities, as something that was generating $2-$2.5 million per year to benefit wider Bahamian society when the Christie administration was voted out of office in May 2017.

Besides the 2 per cent 'community contribution', the present tax structure requires web shop operators to pay 11 per cent on taxable revenue or 25 per cent of EBITDA (earnings before interest, taxation, depreciation or amortisation), whichever is greater.

However, under the 2018-2019 Budget's proposed new 'sliding scale' they will pay:

  • Up to $20 million in revenue, a rate of 20 per cent.

  • Between $20 million and $40 million, a rate of 25 per cent.

  • Between $40 million and $60 million, a rate of 30 per cent.

  • Between $60 million and $80 million, a rate of 35 per cent.

  • Between $80 million and $100 million, a rate of 40 per cent.

  • Over $100 million, a rate of 50 per cent.

And, in a nasty twist as far as web shop operators are concerned, the Government has also imposed new taxation on gamblers themselves rather than the sector. Patrons, from July 1, will have to pay a 5 per cent Stamp Tax on both their web shop deposits and non-online games/digital sales.

Mr Wilchcombe yesterday suggested the Government's approach to the web shop industry may have been clouded by political overtones, especially the perception that its ever-grateful operators would be substantial financial contributors to the PLP.

"Many of them sitting in office don't like the gaming industry, and were against its legalisation," he told Tribune Business. "One thought it was going to empower then to be political players in conjunction with the PLP.

"No. The reality of it is these are people who have moved along the lines and demonstrated they can be professionals. It's something where those in opposition to it believed we were seeking to empower those who should not be empowered."

Members of the Minnis Cabinet have made clear their dissatisfaction with the domestic gaming industry's present regulatory structure. Dionisio D'Aguilar, who currently has ministerial responsibility for the sector, gave signals that he believed increased taxation was appropriate within months of becoming minister of tourism and aviation.

Mr Wilchcombe, meanwhile, backed web shop industry arguments that the tax hikes, which the industry argues range from 238 per cent to 453 per cent, would drive the sector and its patrons back into the 'underground' economy that existed pre-2015.

He added that this would attract renewed scrutiny of the Bahamas by the international bodies that have 'blacklisted' this nation's financial services industry for perceived regulatory weaknesses.

The ex-Cabinet minister argued that the Government should instead focus on ensuring web shops live up to their present regulatory/taxation obligations, and operate in accordance with global best practices.

"They play a major role in providing employment. I'm very concerned about that," Mr Wilchcombe said of the projected 2,000 job losses. "We have to appreciate we have a high level of unemployment now, and they provide more jobs than the casinos.

"If you put them in the unemployment line, you're creating more problems. The approach is absolutely and totally wrong. If you are committed to raising tax rate by 2 per cent or whatever, why couldn't you have discussed it with the gaming houses.

"These are businessmen, reputable businessmen. This is wrong. It sends a wrong message to the country, and is destructive to this industry which is creative and thinking outside the box. It's legal, and there's no reason to penalise them having arrived where we are now."

Comments

Well_mudda_take_sic 5 months, 1 week ago

The PLP and the numbers bosses are a match made in heaven when it comes to their shared great love of graft and corruption, and their willingness to play the tired old race card used for decades to manipulate our grandparents into thinking white people were responsible for all of the ills in our society long after majority rule.

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Porcupine 5 months, 1 week ago

These arguments are the same; rehearsed nonsense moving toward total bullshit. A chance to eliminate them and start a national lottery. The web shop owners and their over paid cheerleaders need to find productive work.

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Economist 5 months, 1 week ago

Mr. Wilchcombe is an old man with old out dated ideas and should be ignored.

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Porcupine 5 months, 1 week ago

Many old men have great ideas. Out dated ideas are prevalent in both old and young, especially in a country that doesn't believe in reading. Unless it is an outdated particular book. But yes, Wilchcombe should be ignored.

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BahamasForBahamians 5 months, 1 week ago

He's younger than Hubert Minnis - what does that say about your prime minister?

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DaGoobs 5 months, 1 week ago

The opposition response to 12% VAT and increased webshops taxes is reminiscent of Chicken Little: "The sky is falling. The sky is falling." I'll bet $100 to Obie's $1 that this time next year not one webshop will have closed or that they will have laid off 3000 people or anything near that number. Things are too sweet for them to cut off their noses to spite their faces. 11% tax was a ridiculously low number and the latest increase ain't really enough but will do and get the people enough in taxes for now. There's nothing discriminatory about this tax increase. Bahamians can't gamble in local casinos and the foreigners don't come over the hill to gamble in the webshops. And the webshops story that gambling companies only pay 15% tax in England ain't true. It's more like 63% because they also pay taxes that go towards sports, arts, culture, antiquities and education.

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bogart 5 months, 1 week ago

....web shops ..stellar performers ????

  • majority of Bahamian citizens voted against in a state conducted Legal held officiated internationally recognized democratic held Referendum...the Result by the voters was majority NO Against Gambling...and the same govt authorizing the voting to determine the citizens democratic choice ....went against the citizens voyte
  • Gambling .....to be profitable....... extracts more money from its customers ....including what is paid in ......salaries..utility bills....business licence fees..advertising......
  • Gambling.....is not just isolated to what happens inside the closed doors of its business shop.....there are enormous devestating costs....to the pore user and family where there are limited economic opportunities to work and provide food ..pay light bill, medecine....the lure by top marketing gambling pprograms to lure persons to turn a .....10, 25 cents into the odds stacked against them ...winnings....the chances of gambles ever winning more than a gambling house is never more than what they would ever gamble and if so slim or gambling houses would be out of business.
  • the end results of 30 to 50,000 persons gambling results in .....huge profits for a few owners ..which if redirected can pose disruptions in other businesses
  • cash flows of these gambling operations need to be monitored in terms of posing liquidity ....threaths....to the normal countrys operating Central Banks operations with govt policy, employment, cpmmercial banking operations, foreign exchange operations, maintaining adequate provisions for foreign curriency purposes...interest rates....etc..?they cannot withhold currenvy...and then dump currency as the numbers housed pleases....that is not a mere threat....that is using currency for financial terrorism....affecting the entire sovereign nation....and all others with whom the nation does business, trading with, imports etc..and hurting the pore/poor people again.
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Porcupine 5 months, 1 week ago

Why are we spending so much time on an issue we spoke to in no uncertain terms already. I am totally in favor of capital punishment. But, only for those who are killing thousands of people slowly, rather than those who kill one person at a time with a bullet to the head. It takes a truly unthinking person to argue the difference.

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BahamaPundit 5 months, 1 week ago

If you want to know what the PLP think of Bahamians just look at the webshops. Every cent of the web shop money comes from conning gullible Bahamians out of their savings.

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TalRussell 5 months, 1 week ago

Ma Comrades, it's difficult to get grip on what Imperial red shirts cabinet can do to wean the nation off da Numbers - if anything - and at what cost to PeoplesPublic Purse, when neither the former or current governments have ever made PeoplePublic what was in Agreements signed with Numbers man's... just have feeling the PLP's left office contractual obligations to the Numbers Balls, all tied up in complicated legal knot... enough knots make Imperial red shirts OBAN fake signature deal to look likes legal kindergarten play

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