By NEIL HARTNELL
Tribune Business Editor
The Government was yesterday accused of “disrespecting” the web shop industry by setting an arbitrary end-of-week deadline to resolve their differences over the five percent patron tax.
Wayne Munroe QC, the attorney representing the Island Game and Paradise Games chains, told Tribune Business that the Government seemed determined “not to consult our clients” with the industry yet to receive a response to its recommendations on the draft rules that will govern the stamp duty levy on customer deposits and over-the-counter lottery ticket sales.
He and his fellow attorney, Alfred Sears QC, who is acting for Sebas Bastian’s Island Luck group, both submitted their responses to the Government’s first draft of the rules before end-October but have heard nothing since.
Unable to determine whether there have been any adjustments based on the industry’s recommendations, the two-week silence was broken on Tuesday when Carl Bethel QC, the Attorney General, warned that the legal battle between government and web shop industry would resume unless the two sides resolved their patron tax differences by week’s end.
Mr Munroe said this showed that the Government was treating one of its largest tax-paying industries in “a very curious way”, and accused Mr Bethel of adopting “the wrong attitude” by setting what amounts to an ultimatum.
He argued that The Bahamas was the only nation where gaming operators were being transformed into tax collectors on the Government’s behalf, suggesting that “nowhere else in the world” is direct taxation – namely the five percent stamp duty levy – imposed on players and patrons.
Describing the renewed tension as “unfortunate”, Mr Munroe told Tribune Business: “Alfred [Sears] would have sent the attorney general his response on October 26, and I sent him my response after that to the draft rules.
“I pointed out little things: There were references to stamp tax in the rules, when the Act refers to stamp duty. I also pointed out that the proposal for rounding up and down led up to interpretation inconsistencies with the Act. I’d very much like to hear how they propose to reconcile what they want to do with the Interpretation and General Clauses Act.
“That was two weeks ago,” the well-known QC continued. “We haven’t heard from them since, except on Tuesday, to say we have to have a meeting within the next four days. It’s unfortunate if their position is that…..
“We thought we were going to sit down and have a reasonable discussion over the issue. We thought our responses would be a pretext for a meeting, but to suddenly say we have to meet Thursday or Friday, that’s unreasonable. I don’t understand the great rush.”
Mr Sears yesterday confirmed to Tribune Business that talks between the Government and web shop industry over the five percent “patron tax” were ongoing, but declined to comment further. “We’re certainly engaged in good faith negotiations, and will give it our best efforts,” he said.
The delayed implementation of the Budget’s new and increased web shop taxes cost the Government between $8-$12.6m in revenue for the first quarter of its 2018-2019 fiscal year, with the industry ultimately seeking legal redress through the Supreme Court.
Mr Bethel, though, indicated that the Government’s patience over efforts to secure an out-of-court resolution was starting to run out. “We are in discussions with the attorneys for the gaming house operators. We don’t accept their interpretation of the law,” the Attorney General said outside Cabinet.
“We are still seeking to agree to a framework on the last remaining issue, which is the stamp tax on deposits by gaming patrons. I think that we’ll have some further meetings this week and then it will either be: We’ll have an agreement, or if not, we’ll go to court and we will have to fight it out.”
Tribune Business understands that Mr Bethel had promised to send a revised draft of the “patron tax” rules to the web shop industry yesterday, but the sector had yet to receive anything by mid-afternoon.
Mr Munroe, though, said a meeting would be very difficult unless the web shop industry knew the Government’s position on its recommendations in advance, and which had been incorporated into the rules, “outright rejected” or were open for further discussion.
Warning that a renewed legal battle will be expensive for all concerned, he said the Supreme Court itself had urged both sides to try and reach a negotiated settlement, and added that M Bethel’s comments would not intimidate the web shop industry given that the two sides were already in court.
“We were seeking to see if we could resolve this reasonably and move forward,” Mr Munroe told Tribune Business, explaining that web shops are not “going to willy nilly round up, increase the rate of taxation and some patron sue them”.
The potential liability from “rounding” has been one of the web shop industry’s primary concerns, as it could lead to an over or under-payment of the due Stamp Tax by patrons.
The issues were set out by Neil Major, Island Luck’s chief compliance officer, who warned in an August 16, 2018, letter: “No guidance has been giving on the rounding up or down of fractional cents, or if there would be variance based on type of transaction. With the number of transactions occurring, this has an impact on the financial results.
“Rounding of small amounts: We process tickets as small as $0.10. Rounding here could make this a 10 percent Stamp Tax on some customers.”
Questioning why the Government is treating an important revenue generator in this manner, Mr Munroe said: “We are being made tax collectors. Nowhere else are gaming operators made to become tax collectors for the Government. We have to get it right. I don’t understand why they seem to have difficulty talking to us to get it right.
“Our clients have a desire to co-operate. They’re businessmen; they don’t want to be in court. As far as possible, they get us to work with the Government to come up with something fair and equitable that works for all.
“They’re really just not prepared to consult our clients. I’m getting the impression there’s a lack of respect driving this inability or refusal to consult properly. It’s unfortunate for a group of taxpayers they say they want to collect so much taxes from.”
Tackling Mr Bethel’s comments directly, Mr Munroe added: “That attitude is just the wrong attitude. I’m told there is no larger tax-paying industry than this industry; that the Government collects no more taxes than it proposes to collect from these taxpayers. For the life of me I don’t understand the disrespect to this group of taxpayers…. I live in hope.”
Dionisio D’Aguilar, the Cabinet minister with responsibility for gaming, admitted in the summer that the introduction of the five percent “patron tax” – together with the increased “sliding scale” rates imposed on the web shops themselves – was “not as easy” as the Government had initially thought.
Implementation was initially delayed because the patron levy’s introduction meant that the web shop industry needed to have all its games tested and re-certified by independent laboratories to verify that they performed as advertised.
One web shop industry source, speaking on condition of anonymity, said all the angst could have been avoided had the Government consulted properly with the web shop industry over its planned tax reforms.
“There’s been a lot of rhetoric about public-private partnerships,” they said, “but certainly in the gaming industry it’s not been the kind of consultation one expected that was consistent with international best practices.
“A lot of these issues could have been avoided had there been dialogue with the industry, and in the same way the Government has structured dialogue with the banks and other areas of the financial industry.
“Gaming is part of the financial industry, and if we don’t get it right in gaming you leave the entire financial industry exposed.”