By NEIL HARTNELL
Tribune Business Editor
The Attorney General yesterday warned the web shop industry’s tax hold-outs they are on “very shaky ground” in failing to comply with the settlement agreed with the Government.
Carl Bethel QC told Tribune Business that the Minnis administration had strong legal arguments against the position being taken by Wayne Munroe QC and his three web shop clients - Island Game, Paradise Game and Asure Win.
Two of these operators are understood to have only paid taxes due for July 2018, while the other and Craig Flowers’ FML Group of Companies have yet to pay anything at all for the 2018-2019 fiscal year.
Mr Bethel on Tuesday had accused Mr Munroe of “playing games”, with the attorney general’s efforts to reach his QC counterpart before and during the Easter weekend proving fruitless as the latter was off-island.
Disclosing that “nothing as yet” has been resolved between the Government and industry hold-outs, Mr Bethel yesterday told this newspaper: “I called Mr Munroe. He said he was off-the-island and saw the missed calls, but never called back. I’ll give him a call.”
Tribune Business yesterday received further confirmation that Mr Munroe and his clients are opposing the retroactive payment of taxes for the 2018-2019 fiscal year’s first half under the old rate structure.
That system, 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of taxable revenue or 25 percent of earnings before interest, taxation, depreciation and amortisation (EBITDA), was repealed when the 2018-2019 Budget was passed at end-June 2018.
Mr Munroe told Tribune Business in late December 2018 that, as a result of that repeal and the attorney general’s previous undertaking not to enforce the new regime after the industry took the matter before the Supreme Court, no taxes were due or owing by the sector for the first six months of the current legal year.
“That’s our position. I think the Attorney General may dispute that, but that’s our position and that may or may not be something that goes to court,” Mr Munroe said then.
It is understood, though, that the Government believes it has a solid legal position to demand the payment of retroactive or ‘back’ taxes under the settlement agreement’s terms by virtue of the Interpretation and Clauses Act’s section 22.
This allows a repealed law, such as the old 11 percent taxation structure, to remain “in force” until the one replacing it takes full effect. “Where any written law repeals in whole or in part any other written law, and substitutes other provisions therefore, the repealed written law shall remain in force until the substituted provisions come into operation,” the Act states.
Mr Bethel declined to confirm this when it was put to him yesterday, but told Tribune Business: “I don’t propose to argue in the press. We’re relying on the law. We have good legal grounds, and Mr Munroe is on very shaky legal grounds. If he wants to persist, that’s his problem.”
This newspaper, meanwhile, can reveal exactly where the seven licensed web shop operators are in paying their taxes as per the settlement agreement reached with the Government in mid-February.
A highly-placed source, speaking on condition of anonymity, confirmed that Sebas Bastian’s Island Luck and Ultra Games chains, and Chances had paid up and were current with both their first-half taxes and those for the 2019 calendar year-to-date that are based on the new, higher rates.
Those three operators had all signed up to the mid-February 2019 settlement with the Government, with the outstanding monies due from those who did not. Tribune Business was told that Paradise Games and Asure Win had paid taxes due for July 2018 and then stopped, while FML and Island Game have yet to pay anything in accordance with the settlement’s terms.
Both Mr Munroe and Mr Flowers again could not be reached for comment yesterday. Mr Bethel yesterday confirmed that Island Luck and Ultra Games, together with Chances, were fully paid-up when it came to taxes due for the 2018-2019 fiscal year, but declined to comment further.
“You go by whatever source you have,” he said. “I’m not a man to be scrutinising financial statements. I’m aware of the bigger picture but not the minutiae.” The Attorney General on Tuesday had described the web shop taxation issue as “a little confused”, as he believed some had started paying again, but added of Mr Munroe: “In my view he’s playing games.”
Under the mid-February settlement agreement, so-called “back taxes” for the first half of the 2018-2019 fiscal year - from July 1-December 31, 2018 - were to be levied at the web shop’s old taxation rate of 11 percent of gaming revenues. This was replaced by the new “sliding scale” operator tax, and its new rates of 15 percent and 17 percent, with effect from January 1, 2019.
K P Turnquest, deputy prime minister, yesterday criticised the web shop hold-outs for continuing to “challenge the Government’s ability to tax” and further extending the uncertainty for both the sector and Public Treasury.
“We do have a number of outstanding payments from a number of the gaming houses,” Mr Turnquest confirmed to the media. “We certainly hope that the agreement that had been reached with the industry will be adhered to, and we’ll be able to report to you shortly that everybody is current and living up to the commitment that was made.
“It’s unfortunate that several of them continue to believe they can challenge the Government’s ability to tax. Hopefully that will be disposed of in short order, and we can all move on with some surety with what the taxation is for the industry and we can better predict what the revenue is going to be.”
Dionisio D’Aguilar, minister of tourism and aviation, who has responsibility for gaming, yesterday told Tribune Business: “Negotiations are ongoing and everybody is trying to sort it out.” He declined to comment further.
As a result of this settlement compromise, Mr D’’Aguilar previously said the Government was now projected to earn $50m per annum - rather than the initially forecast $75m - from gaming taxes.
While this represented a one-third, or 33.33 percent, reduction from the 2018-2019 Budget’s target, the Government argued that it still represented a 127 percent increase in revenue generated by web shop taxation - thereby making for “an acceptable compromise”. Implementing the “compromise”, though, appears to have been much harder than thought.
The Government failed to realise $25m in projected first half revenues as a result of its legal battle with the web shops, with $15m of this sum relating to “sliding scale” operator tax proceeds and $10m attributed to the now-replaced 5 percent Stamp Duty on patron deposits.
Using the old “operator” structure for the 2018-2019 first half will generate around $11-$12m for the Treasury based on previous full-year collections of $21m, which is less than 50 percent of what the Ministry of Finance had projected to earn - $15m “sliding scale”, and $10m from the “patron tax” - during that period.