By NATARIO McKENZIE
The attorney general yesterday slammed as a “false parallel” suggestions that the web shop industry’s tax hikes will violate the European Union’s (EU) anti-tax evasion demands.
Carl Bethel QC told Tribune Business that the comparison drawn by Alfred Sears QC, Island Luck’s attorney, was “specious” and dismissed his argument that the sector’s new and increased taxes would run afoul of the 28-nation EU’s demand to eliminate so-called preferential tax breaks for non-resident entities.
Mr Sears, in a statement issued on Sunday, had suggested that the tax hikes were “a classic case of ring fencing” due to the preferential tax breaks/concessions granted to foreign-owned casinos compared to the domestic web shop industry. He added that this placed The Bahamas “in clear and present danger” of violating the EU’s call for such tax advantages to be ended.
But Mr Bethel, hitting back, argued that there was no comparison between the Bahamian gaming industry and the reforms devised to end so-called “ring fencing” in the financial services sector.
He added that Mr Sears’ argument was flawed because the hotel-based casinos at Atlantis and Baha Mar were not non-resident entities, but part of the domestic or onshore economy just like the web shops. The attorney general said the EU was only interested in “ring fencing” that separated the domestic and so-called “offshore” sectors of the Bahamian economy – a situation that did not apply where gaming was concerned.
“That’s a false parallel,” Mr Bethel blasted. “There is no parallel between the ring fencing the OECD and the EU are attacking, and the difference in taxation mechanisms between onshore casinos and web shops.
“The fact is that all of these onshore casinos, even when they do their electronic gambling on their properties, it all takes place in The Bahamas. It is run by casino managers and croupiers who are Bahamians in The Bahamas, and they have a separate taxation regime permitted by our laws.
“There is no ring fencing. Ring fencing is giving someone a preference you don’t give to someone else for the purpose of them coming and doing offshore business. All of our casinos perform onshore business by their very nature.”
Mr Bethel added: “To attack the separate taxation regime for onshore casinos in that way is a specious comparison to what the EU is complaining about. It’s harmful to the country for someone to issue a statement like that on such a specious ground and getting a headline alleging ring fencing, when it is plain – and must have been known to Mr Sears – that this is not a ring fencing situation. It’s unfortunate that he would have gone to that level, in my view, of what could only be called a desperate argument seeking to get a headline.”
The attorney general also dismissed suggestions that negotiations between himself, representing the Government, and the web shops have not been in good faith. He added: “I put to them a suggestion. Mr Sears came with something totally different that went contrary to the very spirit of what we have been discussing.
“It was purported to be a complete settlement, but a complete settlement of terms he knew were simply not acceptable. The structure that he had proposed was unacceptable. This had been made clear to them already. On that basis we’re going to have to prepare to go to court.”
Mr Bethel continued: “In terms of good faith I’m still waiting to get a response from Mr Munroe on behalf of his clients, and undoubtedly as with Mr Sears he will make a proposal. We are waiting for that. We have done nothing on the record until such time as we hear from Mr Munroe. What could be higher good faith than that?
“What I was trying to make clear was that in the absence of a reasonable position that we could accept, that the public revenue could accept, we’re prepared to go to court as soon as it is possible to obtain a date. We can go to court and have the matter resolved if we cannot get an agreement acceptable to the public revenue.
“Right now, public tax revenue is being held by the gaming houses and isn’t going into the Treasury. Every taxpayer has a disproportionate burden if major taxpayers such as them are not paying anything into the public revenue. It creates a disproportionate burden on every taxpayer in this country.”
The web shops’ case is based on what they allege is the lack of due process afforded to the industry over the introduction of a ‘sliding scale tax structure’. They view its new and increased rates as arbitrary, punitive and discriminatory.
Under this structure, web shops pay on each portion of their revenue:
• Up to $20 million in revenue, a rate of 20 per cent.
• Between $20 million and $40 million, a rate of 25 per cent.
• Between $40 million and $60 million, a rate of 30 per cent.
• Between $60 million and $80 million, a rate of 35 per cent.
• Between $80 million and $100 million, a rate of 40 per cent.
• Over $100 million, a rate of 50 per cent.
Five out of seven web shop operators fell solely in the lowest 20 percent category, while for a sixth, only a small portion of its revenue fell into the 25 percent category. Only Island Luck, the market leader, whose revenues will attract all tax rates.
The web shop industry and its consultants have also argued that The Bahamas is unique in levying a tax directly on patrons as opposed to the gaming house operators. However, the Government believes this is necessary to tackle the social ills caused by excessive gambling and help deter the industry’s growth.