By NEIL HARTNELL
Tribune Business Editor
Sebas Bastian yesterday warned web shops face a "wipe out" from tax increases of up to 355 percent, as the sector accused the government of deliberately seeking to "cripple" it.
The Island Luck chief confirmed to Tribune Business that he, and other operators, had been blindsided by a 2018-2019 budget that singled out the industry for huge tax hikes.
Mr Bastian's sentiments were echoed by Craig Flowers, head of the rival FML Group of Companies, who warned that operators will likely be forced to make a "business decision" in the face of the government's new levies - which some may interpret as meaning location closures and job losses among the sector's estimated 3,000-4,000 employees.
The government's own projections show it expects total gaming taxes to near-double in the 2018-2019 fiscal year, from $36.5m to $70.039m, as a result of completely overhauling the domestic gaming industry's tax structure.
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.
This comes on top of a new "sliding scale" tax structure for the revenue earned by the operators themselves, with the rate increases ranging from low of 81 per cent to a high of 355 per cent compared to what the sector currently pays.
The proposed rates are:
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.
This compares to the present tax structure, which 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.
Mr Flowers told Tribune Business: "I think we all were expecting something to come from the new administration. It's no surprise to the industry operators. The only surprise is probably the size or the magnitude.
"I don't think the Minister [Dionisio D'Aguilar] ever shied away from making it absolutely clear that this industry would be revised by the present government. Governments have the economy to guide the country in the direction they feel more comfortable with. A lot of times we may or may not like the decisions, but that's what we elected them to do."
Mr Flowers said he had not been fully informed on the tax structure, but added: "I know my company would fall in the high bracket, and whatever those numbers are a decision would have to be made by us whether we would be prepared to pump in the reserves to sustain the operation. We will do our due diligence and come up with a decision.
"There's nothing wrong with saying you have made a decision that you feel is in your best interest to close your business and move on,. as long as you pay your debts to your customers. Our company, FML, doesn't have anything to be ashamed of. If that's what it is, that's what it is.
"If you don't have the resources to deal with the clash flow reduction as these things are rolled out, along with paying employees as well as others taxes and bills separate apart from this tax, then you have to make a business decision. Is government fair to roll all of industry's taxes into one?"
The Bahamas Gaming House Operators Association, which represents the sector, yesterday said the magnitude of the proposed tax increases suggested the Government was trying to deliberately disable the industry.
Describing itself as "stunned and appalled" by the Budget's contents, the Association said in a statement: "It represents a very unfortunate day in the Commonwealth of the Bahamas to see a Government blatantly discriminate against one industry versus another.
"It is equally unfortunate to fathom the level of increase in taxes levied on the industry, and now its patrons, which could only be aimed at crippling the domestic gaming industry." It suggested the industry was being "singled out", and added: "This is hardly what you would expect in a free-market economy where persons are now being targeted because they run an efficient and profitable business.....
"We do not see the Government taking aim at the liquor or construction industries. We don't see them targeting the commercial banks, food stores or port operators. So why is it that the gaming sector should see such a drastic increase in taxes?
"We would have thought that, in 2018, we would have been beyond this kind of economic oppression, but it appears that we still have a long way to go."
Governments worldwide, though, frequently target activities such as gaming, and products such as alcohol and cigarettes, with heavy taxation. This is due to both their addictive nature, with persons prepared to pay no matter how prices go, and the desire to levy so-called 'sin taxes' on industries seen as having a potential negative social impact.
The UK government, for instance, concerned about the proliferation of gaming houses and betting shops there, has launched a review of the sector's regulatory framework. It is especially concerned about fixed odds betting terminals (FOBT), which are seen as contributing to gambling addiction problems because of the high frequency with which bets are made.