The government’s proposed increase in taxes for gaming house operators is a “death warrant” for the industry FML Group of Companies CEO Craig Flowers said yesterday who warned that operators may be forced back underground.
While he admitted that FML has “deep pockets”, Flowers said he it will be “almost impossible” for his company to continue operating if taxes are increased.
“It is no way, it is no possible way that any of the existing web shops can continue to operate with any profit margin to take care of themselves and their expenses if these taxes are implemented,” said Flowers, who appeared on the Love 97 FM talk show “On Point” with host Wendall Jones.
“FML, my company, we have deep pockets and we can go back to our reserve. But there aren’t too many companies who have the history in the lifetime in the industry as FML does and may not have these resources in order to stay in the game or to stay competitive into the game.
“I really don’t know what was the intent is.”
He added, “…For me, where I stand, I can honestly say that it is hugely, hugely, almost impossible for me to continue with FML if these conditions are implemented.”
Gaming houses employ an estimated 3,000 people throughout The Bahamas.
Last week, Deputy Prime Minister and Minister of Finance Peter Turnquest announced in the House of Assembly that gaming house activities will be taxed “through the introduction of a sliding scale of rates applied to taxable revenue”.
Turnquest explained that gaming houses that make revenues up to $20 million will be taxed at a rate of 20 percent; those that make between $20 million and $40 million will be taxed at a rate of 25 percent; those that make between $40 million and $60 million at a rate of 30 percent; those making between $60 million and $80 million at a rate of 35 percent; those making between $80 million and $100 million at a rate of 40 percent; and the gaming houses bringing in more than $100 million at 50 percent.
The government has also proposed taxing gaming patrons through a five percent stamp tax applied on deposits and any non-online games or digital sales.
Government collected $36.5 million in taxes from the gaming houses in the 2017/2018 budget period and expects to collect $70 million in the 2018/2019 budget year. The gaming industry is currently taxed at 11 percent of adjusted gross revenue or 25 percent of EBITDA (earnings before interest, tax, depreciation and amortization), whichever is greater.
Turnquest explained that the government must find a way to pay off its “massive backlog of arrears” and set the stage for pending reductions in customs duties when The Bahamas accede to the World Trade Organization next year.
Flowers said he believes the government wants to shut web shops down by driving away patrons.
“…If the government is going to impose a second tax on the patrons, certainly the patrons are going to say, ‘no way,’” Flowers said.
“No way. It is unacceptable for the government to impose two taxes on one person for one bet.
“It is to say, ‘You patrons, go home. Don’t come out here. Don’t come back to these places. Go somewhere else. Find something else to do with your funds.’
“That is what that is blatantly saying. That is clear. That is as clear as day.”
Flowers added that web shops will be forced to “remove ourselves from the front street and go back to the places where we were before”.
“If the web shops are forced to go back underground or remove themselves from a regulated environment this whole exercise fails,” he said.
“They are bordering very closely, very, very closely on that thin edge.”
He said web shops will go someplace where the taxes do not apply.
“The thing with it is that most web shops are comfortable there,” he said. “We were just there a few years back. We are not going to a strange place.
“We are going back to some place that we have been for decades. We have operated successfully in that environment for decades. You are not sending us to prison. You are not sending us to any dungeon.
“You are sending us back to a place we are familiar with. We were conceived in that environment.”
The Bahamas Gaming Operators Association (BGOA), of which Flowers is a member, is threatening to sue the government if it fails to engage with operators over the increase.