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Web Shops Facing Taxation 'Wipe Out'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

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.

Comments

yari 10 months, 4 weeks ago

Best thing the government has done. Tax them out of existence and tax the gamblers who make them richer!

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tetelestai 10 months, 4 weeks ago

Yari, where I may not disagree with your overall point, my only question is this: What then do you do with the thousands of Bahamians that you will make unemployed by taxing the gamers out of existence. It is not as if jobs are readily available for them. Again, I am not questioning where you stand on gambling, my question is to the thousands of households that will go without a breadwinner virtually overnight.

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Well_mudda_take_sic 10 months, 4 weeks ago

To tetelestai: You and others like you would use the same absurdly fallacious argument to try and justify drug trafficking and all sorts of other illegal activities. We all have a pretty good idea who you (or members of your family) look to for their supper. I pity you and those of your same mindset.

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tetelestai 10 months, 3 weeks ago

The stupidity of your post is only matched by your very scatological and, apparently, non-existent, brain.

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ThisIsOurs 10 months, 4 weeks ago

The govt had no trouble sending 3000 people home over the past few months. There was no concern for their families. It was all hard business decisions.

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DDK 10 months, 3 weeks ago

They can try get a job with Government!

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UserOne 10 months, 4 weeks ago

I agree. They get no sympathy from me. They profit hugely from people's addictions.

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B_I_D___ 10 months, 4 weeks ago

What blows my mind is that the people who play the numbers can't seem to grasp the concept that the money Flowers and Sebas are raking in is insane...it's not about 'everybody wins'...everybody loses...to the tune of a collective 100M+ per year if we assume Flowers saying he is in the highest bracket. The end game in any gambling organization is to WIN...you the public LOSE. What potential could come from having those hundreds of millions of dollars sucked up by the gambling houses, actually doing some good in the broader economy, buying tangible goods, buying homes, paying bills, etc, etc. Damn fools to be running numbers.

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proudloudandfnm 10 months, 4 weeks ago

Good. No problem. Shut em down and let's get that national lottery up and running. A quarter billion a year can do plenty good for the people. Sebas has enough money to last 10 lifetimes. He won't even feel it.

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TalRussell 10 months, 4 weeks ago

Ma Comrades, for the sake transparency - neither Craig nor Sebas are doing anything other than operating lawful gambling operations, all sanctioned under this red government.

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JackArawak 10 months, 4 weeks ago

Don't like the legislation that is associated with your business? Close down and enter a new industry. It's very simple. This is the one thing the government has suggested that makes sense. Now we need FOIA, equal rights for women, etc etc.....all the stuff they promised and more

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yari 10 months, 4 weeks ago

@TalRussell: You are a true revisionist. They were common criminals till the PLP government 'legitimized' them. I am pretty sure they can be prosecuted for their past illegal gaming activities. Can a lawyer give a legal opinion?

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TalRussell 10 months, 4 weeks ago

Comrade, let's be clear - common sense does not rank high within ranks red shirts..... likes have how many convictions gotten so far..... remind you, it now seems even the prosecution missing red fire hydrant, may have been too quick of a rush deliver red justice?

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JohnDoes 10 months, 4 weeks ago

I think Sebas and the Gaming House Syndicate have forgotten how many years they were actually operating 'illegally'. He speaks as if he has done no wrong. If I were him I would consider myself lucky to avoid long term jail time and escalating fines for the years of blatant disrespect for the law; bootlegging these numbers & swindling thousands of desperate Bahamians. The legalization and gentrification of the 'Number House' by the former government was a big slap in the face to Bahamians and a big slap on the wrist for these well known money laundering 'law breakers'. The only thing that is 'very unfortunate' to them is that this will now probably lower their lucrative income, slow 'some' of their frivolous spending & showing off that they love to do. Even though I doubt that this would affect anything except highten the odds of losses vs winnings, maybe some job loss even though they probably dont employ as much persons they love to make us 'think' they do. They can always control their income & that is how their 'system/softwares' operate for those that dont know. These persons are modern day 'pirates'. The gravitational forces radiating from Woodes Rodgers grave can be used as an ideal 'centrifuge' for the training of top notch astronauts and jet fighter pilots alike, let alone the possibility of time travel itself.

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OurBahamas 10 months, 4 weeks ago

Cry me a river...Shut them down!

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jackbnimble 10 months, 4 weeks ago

Long run, short catch. They’ve been making mega millions off thr backs of poor people for years and that last corrupt government actually legalised their crimr so I’m not the least bit sorry.

You should have listened to the voice of thr people and not legalised them,

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The_Oracle 10 months, 4 weeks ago

That the Bahamian people "give" flowers, by his own admission over $100 million is mind blowing. We must be the stupidest broke people on the planet! We are here worried about 12% VAT when flowers is operating what appears to be a 24% voluntary tax! Reverse their sham legalization seize assets jail them and start over with a national lottery. Ludicrous.

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sheeprunner12 10 months, 4 weeks ago

They got an illegitimate foothold in this country ......... now pay to play ...... or GET OUT!!!!!!!

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Well_mudda_take_sic 10 months, 4 weeks ago

To hell with the web shops - ideally they should all be shutdown or forced back underground and kept as far away as possible from our legitimate banking system. What we really need is a National Lottery to kill off the web shops once and for all. At least a National Lottery would give gambling addicts a much better winning chance - something you don't stand a chance of getting by spinning the rigged numbers of Island Luck and Flowers. All net earnings of the National Lottery can then be earmarked by legislation to help meet the financial needs of our currently resourced constrained public education and healthcare systems. But I don't expect to ever hear bloggers like John agitating for a National Lottery.......they're much too busy singing for their supper from the likes of Sebas Bastian and Craig Flowers, two real low-life thugs who don't give a damn about the devastating destruction they are causing to the social and economic fabric of our society!

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Well_mudda_take_sic 10 months, 4 weeks ago

In the above article Flowers readily and proudly states/admits:

"I know my company would fall in the high bracket,......

That means the annual revenues from his web shops alone are well in excess of $100 million. These thugs are still laughing all the way to the bank while crippling the social and economic fabric of our society.

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Porcupine 10 months, 3 weeks ago

They are not crippling the social and economic fabric of our society Mudda, They are ripping it to shreds. Proving Bastian and Flowers think that Bahamians are the stupidest people on earth. They need to be shut down. I appreciate your continued posts on this matter, mudda.

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proudloudandfnm 10 months, 4 weeks ago

Sorry Tal we voted no in a constitutional referendum. Perry broke the law when he ignored us. And I did not leave my job to go vote in an opinion poll...

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pablojay 10 months, 4 weeks ago

Just like the writer said, it is a nasty twist to charge gaming patrons 5 per cent on their deposits that is disgraceful.Mostly poor , addicted people,who already are having problems with their finances .But that seems to be human nature,take advantage of the disadvantaged.

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Well_mudda_take_sic 10 months, 4 weeks ago

They are poor and destitute gambling addicts because of the criminal enterprises run by the low-life racketeering thugs like Sebas Bastian and Craig Flowers! It's these two punks who are disadvantaging so many in our society while they themselves are laughing all the way to the bank to launder their ill-gotten gains and riches made off of the backs of the poor unfortunate gambling addicts they have created. We need a National Lottery!!

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ThisIsOurs 10 months, 3 weeks ago

Hehe, don't charge the gambling addicts extra fees because it will hinder their addiction. That's not a great argument:)

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DDK 10 months, 3 weeks ago

Charge the gamblers a 50% sin tax, perhaps THAT will discourage them until Government gets it together to roll out a National Lottery!

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DWW 10 months, 3 weeks ago

All of these commenters are just jealous they didn't think of it first, I dare say. (except of course the town idiot Tal.) If it is human nature to want to find the easy road, no amount of legislation is going to change that. All of these commenters believe that legislation/police/courts are the way to change human nature, when nothing could be further from the truth. societal changes occur for a few very specific reasons.

Point is Bahamians gamble and like to gamble - just like the rest of the world. Just like substances which alter the mind are illegal but it don't stop anyone from getting the green or the white or the rock - having gambling illegal hasn't stopped anyone from gambling. if people are going to do it anyway then why not tax it? Since we are on the subject why don't we stop putting young men in jail for having a bit of plant known as the Devil weed?

I dare say this Bahamas' strong emphasis on church and belief in the ethereal has resulted in the populace' strong believe in winning at rigged gambling. Therefore i suggest that the church should have absolutely no argument to make on this topic. smoke and mirrors is the Bahamian way right?

I also dare to say that i suspect almost all of the persons commenting here and wanting the full scale ban of gambling are self appointed pastors missing the money in their coffers. just like the guy asking his congregation to buy him a $59,000,000 jet so he can praise the lord while flying through the air.

carry on carry on

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Porcupine 10 months, 3 weeks ago

So, a National Lottery and let the proceeds help out for the benefit of society? Or, ignore it and let a couple of people dominate the economic and political platforms of this country?

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ThisIsOurs 10 months, 3 weeks ago

"All these commenters" didn't think of it because it was ILLEGAL.the "mob" and the gangsters were only too happy to profit off of an ILLEGAL trade for decades.

As to Bahamians loving to gamble, Bahamians love to sweetheart and eat foods high in cholesterol and run red lights, Bahamians love to run drugs, Bahamians love to smuggle illegal aliens. Sometimes you have to try to save people from themselves, cause if there weren't any rules they'd be doing atz all the time.

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DDK 10 months, 3 weeks ago

Tax them into oblivion!!! Like one of the posters said, the people that want to place a bet can go to the numbers man like they used to do, once or twice a week. OR THEY CAN BUY A NATIONAL LOTTERY TICKET WHERE-EVER LOTTERY TICKETS ARE SOLD!!!!!!

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screwedbahamian 10 months, 3 weeks ago

The Government should tax the gamblers at a rate of 25 percent on winnings of $100.00 or more.

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TalRussell 10 months, 3 weeks ago

Ma Comrades, it's not Craig and Sabas who are the real hypocrites with the governing power but who show no sign they are the least interested in acting on the moral authority to do right by It's the People's time.

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birdiestrachan 10 months, 3 weeks ago

a NATIONAL LOTTERY IS STILL GAMBLING.

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DDK 10 months, 3 weeks ago

Buying a lottery ticket once or twice a week is NOT the same as sitting in a "web shop" at every possible opportunity watching your earnings disappear into the hands of the greedy. The proceeds of a NATIONAL LOTTERY, after expenses, would go entirely to the needs of the population, IF administered honestly, intelligently and, above all, transparently!

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truetruebahamian 10 months, 3 weeks ago

GOOD! WIPE THEM OUT ENTIRELY ONCE AND FOR ALL!

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TalRussell 10 months, 3 weeks ago

Ma Comrades, I have and remain opposed anything resembling numbers selling but until government changes it - there should a flat tax of $0.60 cents for every $1 in gross sales revenue generated... with no escalating tax payable rates. Winnings should only be taxed on $100,000 and above levels winner payouts... but even at prospects $0.60 cents tax per $1 flowing into public purse - no government should be complicit if numbers are being piggybacked off US state lotteries. I have always had problem that questionable flaw that at one time existed within numbers houses... and may still play major role when-it comes to how payouts are decided?

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hrysippus 10 months, 3 weeks ago

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. Hooray, go for it, government.

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ThisIsOurs 10 months, 3 weeks ago

I'm still wondering what the real impact of this is, online gaming is exempt. We don't know what percentage of their business is online and what percentage is cash, nor do we know which category they fall into for gross revenue. Without those details you can't really tell what the true effect of this tax is on them. Who knows maybe they got together to "make" people believe it's more painful than it actually is. the ne thing we do know is the marketing people are helping Minnis present with lots of "PR but no substance", "no VAT on corn beef" policy positions. So I'll wait to hear them give actual numbers that supply the REAL impact

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DDK 10 months, 3 weeks ago

Hmmm. Excellent point. Had wondered about that. In the interest of transparency, perhaps the Government will let us in on that data. However, they still seem to be having hard time getting a handle on "TRANSPARENCY"!

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John 10 months, 3 weeks ago

Well three points: when Government raises the taxes too much on web shops, they open the door to illegal gambling. And since the illegal and unregulated shops have less overhead they will be able to pay out more while still making greater profits. TWO. Sebas and the Web Shop industry needs to take the government to court on what is clearly discrimination. If you are going to raise taxes on gambling then do it evenly across the board. Taxes on casinos should also be increased. THREE Ever since the web shops were licensed, there was a move afoot to shut them down and chase them out of business. Why does everyone think the Bahamian web shop owners are making too much money? But not so for the foreign owned casinos. Why is everything Bahamian under attack..the fish fry, the jet ski operations, hair braiders, but yet they loading all the taxes on them.

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sheeprunner12 10 months, 3 weeks ago

The Government subsidizes some of the casinos ....... The Numbers Cartel brag about their obscene profits openly ..........What more do you want?????

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Well_mudda_take_sic 10 months, 3 weeks ago

John, you're even beginning to sound more and more like that whining criminal punk Sebas Bastian himself.

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realitycheck242 10 months, 3 weeks ago

The government decision to increase taxes on the web shops is clearly a discrimination issue. To many people are scared to say so..so i will. It shows who are pulling the strings in the red shirts party. There is a segment of the population who dont like the rise in the wealth and status that the web shop fellars have aquired but i would advise them if i was in their position to deversify their company holding and investments... so if and when the web shop cookie comes crumbling down, they would have something to fall back on. There is alot of talk about going the lottery route.in this country and if that eventually happens the government plan will be to ensure that the principles owners of the web shops are shut out completely from any profits from that form of gambling.

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sheeprunner12 10 months, 3 weeks ago

How can you compare the Numbers Cartel (about 5 principal owners of 8 franchises) to a National Lottery that is designed to benefit EVERYONE???

I do not personally support Gambling, but the Government must look out for the greater good of the nation ......... The Numbers Cartel is a selfish minority (like the wholesale merchants, mega-contractors, oil tycoons, doctors, lawyers, accountants, etc.) who are all powerful lobbyists.

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Well_mudda_take_sic 10 months, 3 weeks ago

No, the numbers bosses are much much worse than those you choose to compare them to. The likes of Bastian and Flowers are nothing but low-life thugs who have been allowed by corrupt politicians and equally corrupt regulators and former regulators to run money laundering and other criminal enterprises criminals with absolute impunity. Their web shops are are rapidly destroying the social and economic fabric of our society.

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ThisIsOurs 10 months, 3 weeks ago

I don't believe the webshops have any moral ground to stand on, but I do believe this govt has a tendency to take the easy way out. They seem unwilling to do any deep analysis, something as simply as a background search on Oban and its directors they failed to perform. I believe they sat down and said we need 400 million how much do we need to raise VAT to make that up. It's not that simple

Then they come up with some "innovation" incentive that's limited to people between 18 and 25, what I'd that????? What exactly is the goal to spur innovation or to give opportunities to young people. If you think "innovation" is the key, you can't put arbitrary restrictions on who can innovate. They simply don't display the ability to think deeply

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John 10 months, 3 weeks ago

@mudder-sic...obviously you have license by The Tribune to spread anti-Bahamian vendetta, racial slurs and venom, half truths and fantasy spurred by a twisted imagination and, yes even slander. Obviously you don’t have sufficient faculties or common decency to discuss a matter without getting personal of digging slime out the gutter. And it is just not you posts on the web shops but you are constantly attacking Bahamians. Even with the Labor Day tragedy you go from calling Bahamians terrorists, to stupid unlicensed and uninsured drivers who are usually drunk and full of drugs. Obviously you are not Bahamian. And your constant and repeated rantings suggest a sick mind, most likely driven by hate filled jealousy.

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Well_mudda_take_sic 10 months, 3 weeks ago

Oh please! Did you forget to take your meds again?

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ThisIsOurs 10 months, 3 weeks ago

If you want fairness, Give them people back their radio station and pay for all the years you operated ILLEGALLY based on a ratio of what you currently make. Stop trying to push for a Carnival moratorium when the Govt use the people money to get it started.

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