By NEIL HARTNELL
Tribune Business Editor
The long-awaited tax on web shop patrons’ winnings has been further delayed by another legal challenge from the domestic gaming industry, it was revealed yesterday.
Marlon Johnson, the Ministry of Finance’s acting financial secretary, last night confirmed to Tribune Business that the levy - which had been set for implementation on January 16 this year - was again “on hold” following renewed Supreme Court litigation launched by the web shops’ industry body.
“That is being managed by the Attorney General’s Office. I don’t know the particulars of it, but the Ministry of Finance has been advised that is on hold until it is resolved,” Mr Johnson said of the patron winning tax.
The situation was disclosed in the government’s just-released “fiscal snapshot” for the first nine months of the 2020-2021 budget year, which revealed that total taxes generated by gaming in that period were down by almost 50 percent compared to the prior year due to COVID-19 lockdowns and other restrictions that impacted both the hotel casinos as well as the web shops.
“Taxes on specific services (gaming taxes) contracted by $14.4m (46.7 percent) to $16.4m,” the fiscal report said. “The patron winnings tax, implemented on January 1, 2021, has not resulted in any incremental revenue from these activities due to an ongoing legal challenge by the Gaming House Operators Association in respect to the application of the tax.”
However, sources familiar with the situation said the legal challenge had not been initiated by the association or any individual web shop but, rather, by a patron or group of patrons objecting to their winnings being taxed.
Senator Kwasi Thompson, minister of state for finance, gave the domestic (web shop) gaming industry less than two weeks’ notice that the tax will be implemented during mid-December’s address on the Fiscal Strategy Report.
It is unclear whether this short notice, and an inability to adjust both systems and games, as well as have them verified by internationally-accredited laboratories, lies at the heart of the web shops’ legal challenge, but the implementation date was subsequently pushed back to January 16.
“To help counter the revenue losses, starting on January 1, 2021, the government intends to implement the gaming tax on winnings, passed in the House of Assembly in 2019 as part of the Gaming House Operator Amendment Regulations,” Mr Thompson had revealed in mid-December.
The new tax will see a five percent levy paid by patrons on winnings up to $1,000, and 7.5 percent on anything greater than $1,000. It is projected to generate between $10m-$15m annually in extra revenue for the Public Treasury.
While a relatively small sum in the overall fiscal scheme of things, it will certainly shrink gamblers’ winnings at a time when they will be hoping to land every cent possible due to COVID-19 related high unemployment and income cuts.
The government’s efforts to tax web shop patron winnings date back to 2018, and many will argue as a result that the industry cannot claim ignorance over its potential imposition or say it had insufficient time to prepare.
Its introduction has been delayed several times already, most notably when the government in 2019 tabled regulations in the House of Assembly that failed to give the start date for the winnings tax.
The date oversight added further delay, as web shop operators were also given additional time to have their games tested and certified by independent laboratories that the terms and conditions had not been altered due to the tax’s introduction.
Dionisio D’Aguilar, minister of tourism and aviation, said previously that just 45 percent of web shop gaming activities will attract the new patron “winnings” tax with online casino spins remaining untouched “for now”.
This means that a gambler who wins $1,000 will pay $50 in tax, reducing their take-home winnings to $950. Someone who wins $2,000 will pay $150 in tax, leaving them with $1,850 to take home.
Mr D’Aguilar added that the government had decided to focus this levy solely on lottery/numbers operations because it was too “complicated” to calculate the winnings from online casino spinning, indicating that Bahamian gamblers had got off relatively lightly.
The minister said the comparable winnings tax rates in Jamaica and Barbados are 15 percent and 20 percent, respectively. In the US, he added that the federal tax rate was 25 percent, with state and local taxes on top of that.
While the web shop industry is arguing that the government is eroding patrons’ winnings at the worst possible time, other observers may argue that such a levy is essential to deterring Bahamians from gambling away scarce incomes or unemployment benefits on games of chance.
Leander Brice and Garvin Newball, A Sure Win’s co-chief executives, told Tribune Business their clients need “more time to bounce back” given the hardship imposed by the pandemic’s devastation of employment and incomes.
Saying they were sensitive to “the plight” of patrons, the duo said in a statement: “As an innovative industry, we remain committed to adapting as needed to the ever-changing environment in which we operate.
“However, we are concerned about our patrons as they will be burdened with an additional tax. We want to see our customers win, but most importantly we want them to enjoy all of their winnings. Especially with the impact of COVID-19, an additional tax at this time may dampen the spirits of many who game with us as a source of entertainment and relaxation.
“We understand the constraints of the government and the need for new revenue opportunities, but we truly understand the plight of our gamers and we urge consideration in the timeline of this new tax roll-out to give our patrons a bit more time to bounce back in this current economic climate.”