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Web Shops: 65% Tax Rise Still Tough



Bahamian web shops last night said some operators will still have difficulty with the sector’s revised tax regime and what it described as “a 65 percent tax increase”.

The Bahamas Gaming Operators Association (BGOA), in what amounted to grudging acceptance of the settlement with the government, said the ordeal of its six-month taxation battle highlighted the need for deeper analysis of this nation’s overall tax regime – especially its equity and fairness.

“Though it’s always beneficial to avoid a lengthy court battle, this newly-designed tax regime still represents a 65 percent tax increase, which some gaming operators will still find difficult to manage,” the association said in a statement.

“The industry was never opposed to an increase in taxation, and was always willing to pay its fair share. However, the methodology to achieve that increase was the crux of our disagreement.

“This ordeal highlights a broader challenge, and signals the need for a deeper look at our national tax regime and the issue of proportionality. At some point, as a nation, we must address the inequitable way taxation is levied within and across industries so that we all pay our fair share in these tying economic times.”

It is unclear whether the settlement, and revised “sliding scale” tax structure for operators, together with switching patron taxes from deposits to winnings, will prevent or lessen the mass store closures and lay-offs threatened by web shops when the new and increased taxation was unveiled in the 2018-2019 Budget last May.

One operator, speaking on condition of anonymity, last indicated to Tribune Business that they were reluctant accepters of the settlement. “The Government will do what it wants,” they said. “They want to continue to tax and tax this industry. This industry has become the scapegoat for everything that goes wrong in the country.”

The Government, in a statement late yesterday afternoon, said it had reached an agreement with the web shops “to increase taxes on the gaming industry and to collect the payment of back taxes”.

“The new tax structure consists of a sliding scale gaming tax on net taxable revenue, or the amount received by gaming operators from patrons in bets less the amount paid out to the patrons by gaming operators in winnings,” it said.

“Effective January 1, 2019, all licensed gaming operators will pay 15 percent on $0 to $24m of revenue, and operators earning anything greater than $24m will pay 17.5 percent. Based on the increased tax rate, the Government is expected to collect approximately $35m in taxes from gaming houses annually.”

The Government also announced that effective April 1, 2019, a new tax will be introduced on all winnings derived from lottery bets. Five percent will be paid on winnings up to $1,000 and 7.5 percent on anything greater than $1,000. This new tax is expected to raise $15m annually in revenue for the Government.

“The new gaming tax structure represents a 127 percent increase in taxes on gaming operators, securing just under $50m in total revenue, compared to $21m in 2017. All back taxes will be collected before the end of this budget year at the previous 11 percent rate,” the Government said.

It added that at the beginning of regulation on January 1, 2015, the rate of taxation on net taxable revenue of the seven licensed gaming operators was set at 11 percent and was expected to yield approximately $21m per annum.

“Solving the tax dispute through the courts could have meant years of expensive litigation and prevented the Government from collecting taxes,” said Dionisio D’Aguilar, minister of tourism. “Because of the discussions with gaming industry leaders, the Government was able to secure an increase in taxes as well as the back taxes owed to the Public Treasury.”