By NEIL HARTNELL
Tribune Business Editor
The web shop industry's "sliding scale" tax structure took effect on Wednesday following changes to address operator concerns over its legality, a cabinet minister revealed yesterday.
Dionisio D'Aguilar, minister of tourism and aviation, told Tribune Business he had been advised by Carl Bethel QC, the attorney general, that the new tax format - bitterly resented by many web shops - took effect when he laid in Parliament, and signed off on, the latest changes to the Gaming House Operator Regulations.
The Minister, who is responsible for gaming, said the amendments that introduced the "sliding scale" tax structure with May's budget had used "the wrong terminology" to describe what should be used as the basis for calculating the amount web shops must pay.
He explained that the definition previously employed could have been interpreted as meaning that the different sliding scale rates, from 20 percent up to 50 percent, should be applied to "all the money" that patrons pay.
Mr D'Aguilar said it should actually be based on that sum minus the winnings paid out by web shops, so the Government has moved swiftly to remove the term "revenue collected" from Regulation 57 and replace it with "all taxable revenue".
Some observers, though, will see this as the Government being forced to address a legal/regulatory loophole "after the fact", given that the issue is part of the Judicial Review challenges brought against the industry's new tax structure by the web shop operators.
Sebas Bastian, Island Luck's principal, in an affidavit supporting his firm's action argued that the "revenue collected" definition was so vague as to make it "unenforceable" and contrary to the Gaming House Operators Regulations.
He used it as a minor part of Island Luck's Judicial Review, urging the Supreme Court to grant "a declaration that Regulation 57 (1) of the Gaming House Operator (Amendment) Act 2018 containing the term 'revenue collected' is vague and therefore unenforceable".
Mr Bastian had earlier alleged: "The Gaming Operator (Amendment) Regulation 2018 provides that the purported sliding scale gaming tax on gaming house operators from 20 percent to 50 percent shall be assessed on the 'revenue collected'. 'Revenue Collected' is not defined in the Gaming Act or the Gaming House Operator Regulations.
"In fact, Regulation 57 the Gaming House Operator Regulations 2014 assesses tax on the basis of, and percentage of, 'taxable revenue' or a percentage of earnings before interest, taxes, depreciation and amortisation generated by the operations of the licensee. This term appears, I am advised by counsel, to be vague and ultra vires the Gaming House Operators Regulations 2014."
This issue has now seemingly been addressed by the new Gaming Operator (Amendment) Regulation 2018 tabled in Parliament by Mr D'Aguilar on Wednesday. The Minister told Tribune Business yesterday that this has now permitted the "sliding scale" structure to take effect from Wednesday, although it is unclear whether this is currently blocked by the industry's ongoing Judicial Review challenges that are set to resume on October 5.
Explaining the latest changes, Mr D'Aguilar told Tribune Business: "I'm advised that when they introduced the sliding scale taxes, the regulations used the wrong terminology to describe what was to be taxed.
"It was confusing in the sense that one could have ascertained that what we intended to apply the tax to was the gross gaming revenue; all the money taken in from the patrons. It should have been all the money taken in from the betters minus what was paid out in winnings, which would have left the revenue to which the sliding scale of tax was to be applied."
Mr D'Aguilar blamed the incorrect language on a "communication breakdown" where the regulations' drafters received the wrong instructions about the wording needed to define what should be taxed.
"The wrong definition ended up in the Act," he added. "What this amendment intends is there's no such thing as 'revenue collected'; the only thing defined is 'taxable revenue'. Taxable revenue is defined as all revenue received from gamers minus winnings paid out. The one with revenue collected was irrelevant."
The Minister said he had been advised by the Attorney General that the "sliding scale" tax structure, whose implementation had been delayed since the intended July 1 launch, was now in effect as of Wednesday. It has finally replaced the old structure, which required web shops to pay the greater of 11 percent of taxable revenue or 25 percent of earnings before interest, taxation, depreciation and amortisation (EBITDA).
Mr D'Aguilar added that the "guidance notes", long demanded by the web shop industry to advise them on how to adapt their games/platforms to accommodate the 5 percent "patron tax", were "now ready to go".