Thursday, Dec 13, 2018
HomeOpinionOp-EdFront Porch | A progressive tax on the gaming sector

Front Porch | A progressive tax on the gaming sector


Though the response of the Bahamas Gaming Operators Association (BGOA) to the government’s intention to increase taxes on operators through a sliding scale has been apoplectic and wild-eyed, arguably most Bahamians support the increase on an industry seen by many as exploitative, especially of poorer Bahamians.

In a press release the BGOA claimed: “It is further disappointing that in today’s Bahamas an entire industry can be singled-out and in our view, racially targeted for an increase in government taxes.”

The release thumped: “It’s totally another thing to expect that this will be done because you do not belong to a certain political or social class, or that you have the wrong color of skin.”

That the wealthy well-connected gaming operators would suggest that they do not belong to “a certain political or social class” is laughable, and would come as news to most Bahamians, who are not as well connected, and not of the same social class as multimillionaires, who have enjoyed all manner of political connections.

The charge by the BGOA that the government’s decision is racially discriminatory is rich, coming from wealthy business interests whose operations negatively affect many poorer black people here and in other jurisdictions.

The government’ decision is progressive, redressing the regressive decision of the former government to tax gaming operators at a considerably lower rate than now being proposed.

This column has always supported a national lottery, the proceeds of which would be returned to the Bahamian people for various social and development initiatives. Such a lottery is unlikely to be realized in the foreseeable future.

In terms of social ethics and social justice a national lottery would have been a wiser ethical choice than legalizing a numbers business with windfall profits flowing into the coffers of a select few.

However, instead of a national or public lottery benefitting significantly more Bahamians, the former government regularized a privately owned lottery system in which the majority of the profits accrue to already wealthy individuals, with the government receiving some funds from taxing the private lottery.

Social justice

Most advanced and progressive countries opt for national lotteries as matter of economic and social justice.

Those private groups which run national lotteries in various jurisdictions are heavily taxed, some at a higher level than the government is now proposing for private operators, who are incensed that their huge profits will now be reduced and better directed for public purpose.

Given the country’s precarious financial status and the possible risk of future credit downgrades, the government would have been derelict if it did not significantly raise taxes on the gaming houses. And the tax increases are not as extraordinary as some have claimed.

The sliding scale structure saves the highest tax for the ruling web shops that have taken the most out of poor communities. Small to mid-sized web shops will pay less than the masters of the sector.

We are faced with extraordinary economic challenges, including significant public sector deficits and debt. The wealth revenue derived from increased gaming taxes are needed to address deficits and debt, and help fund necessary social and infrastructural programs.

Money pours out of poorer neighborhoods and many Family Island communities into the bank accounts of a relative few, with next to nothing returning to these communities, often leaving them even more impoverished.

These communities do not need Christmas parties and giveaways. They need concentrated economic and social investments partly derived from either a national lottery or increased taxes on gaming houses.

Political and economic debates have raged for centuries over the state’s role in balancing or negating the effects of the natural and social lotteries of life.

For progressives, government plays a critical role in addressing the inequality involved in life’s lotteries, especially on matters such as ensuring access to education, healthcare and a variety of social goods.

Public action can go a long way in terms of equality of access if not equality of outcome. Which raises the question of gaming lotteries. A lottery is unlike other businesses. It is based exclusively on chance and luck.

Imaginary rainbow

Walk into a grocery store, spend $20 and you come out with that amount of groceries. Walk into a web shop or play $20 online and you come away with a “hope” which is more often than not dashed.

You usually come away with nothing or next to nothing, rarely winning that pot of gold at the end of an ever-elusive payout at the end of an imaginary rainbow.

In playing games of chance most people lose substantially more than they gain. Lotteries often prey on fear and hope, superstition and randomness. It involves the ultimate irrational exuberance.

A public or national lottery is typically designed to expand opportunity and equality for citizens. They ensure a greater common good than do private lotteries which overwhelmingly concern the narrow interests of a few, with little by way of return to the mass of citizens.

Because of the nature of lotteries, in most civilized societies they are largely government-owned and for a reason. These societies utilize lotteries to help rebalance the lotteries of life which leave fellow-citizens in need of help from the state.

Accordingly throughout the U.S., the U.K. and many other countries lottery profits are used overwhelmingly to fund public goods such as education rather than to primarily enrich already bulging private coffers.

With the tax increase on the gaming sector we are moving toward a more equitable public policy that will better benefit the common good.

Last year Tourism Minister Dionisio D’Aguilar, who has responsibility for gaming, was criticized by some in the gaming sector for his comments about the sector, and whether the country should look to a national lottery.

In response D’Aguilar noted: “If I had a business making oodles of money, and some whipper snapper like D’Aguilar turns up and says the nature of the profits being generated by the industry for the benefit of so few, at the expense of so many, is generating too high a social cost and there needs to be a rebalancing, I might be unhappy, too…

“This whole industry has been shrouded in a certain element of secrecy,” he added. “We’ve got to have discussions and see where it’s going to go.”

 

Benefit society

Neil Hartnell subsequently reported in The Tribune: “However, national and state lotteries in nations such as the U.S. and U.K have raised millions of dollars for charities and good causes, and provided significant funding for projects that benefit society.”

Hartnell reported: “The national lottery topic arose as Mr. D’Aguilar effectively ‘doubled down’ on concerns he raised in Parliament last week, arguing that the web shops’ efforts to compare themselves to hotel casinos ‘shouldn’t be taken seriously’.

“While resorts such as Atlantis and Baha Mar generated billions of dollars in GDP impact and foreign exchange earnings, the minister said the gaming houses were wealth redistributors rather than creators – taking money from many, with the profits reaped by relatively few.”

One does not have to subscribe to Ayn Rand’s general philosophy to appreciate her regard for the genuine wealth-creators and her distaste for the middle men and women, who are more adept at profiting from someone else’s labors, rather than creating wealth.

As a historical reminder, casinos were meant to be an incentive to encourage large-scale resort development and were originally designed to be an amenity for tourists who spent only a few days in The Bahamas and not for residents who might patronize them year-round. A Bahamian who was resident abroad, for example, could gamble in the casino on a visit home.

An earlier compromise on the expansion of casino gambling allowed tourists the opportunity to gamble while restricting it to those ordinarily resident in The Bahamas. A number of religious leaders, generally opposed to gambling, quietly accepted such a compromise.

Domestic gaming in the form of spinning, whether from home or at a gaming house, is becoming addictive for quite a number of Bahamians. It is not like when the numbers were “thrown” in years past and one could only gamble once or twice a day.

We are seeing the social consequences of today’s gaming industry, in which gamblers can play games of chance throughout the day and night. We need to study these consequences more in depth.

 

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