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Emails: Web shops ‘feverishly’ worked to implement stamp tax

Emails in an affidavit filed by Island Luck CEO Sebas Bastian show a feverish and monthslong attempt by his company to comply with the government’s five percent stamp tax on deposits made by gaming patrons.

In May, Minister of Finance Peter Turnquest announced a sliding-scale tax system on gaming house revenues.

He also announced a tax on gaming patrons through a five percent stamp tax applied on deposits and any non-online games or digital sales.

Both taxes were set to take effect July 1, but the patrons tax was delayed several times as gaming operators sought to adjust.

The gaming operators filed a lawsuit seeking leave for a judicial review and a stay on gaming taxes on Thursday, charging that the government actions were “unfair, irrational and

oppressive” with regard to the implementation of the stamp tax and sliding-scale tax.

In a June 25 email to Gaming Board Acting Secretary Ian Tynes, Bahamas Gaming Operators Association (BGOA) CEO Gershan Major wrote that the implementation of stamp tax in web shops would take a minimum of 11 weeks “before a gaming house operator would be ready to meet the proposed tax requirements” and at most, 18 weeks.

He explained that the regulation of the technology used by gaming houses “is one of the most restrictive and comprehensive in the world”.

“All software including platform, games and the random number generators (RNG), must be developed, tested, certified and have onsite verification to meet these requirements,” Major said.

He explained that the software used by gaming operators is custom developed, tested internally and that the software along with the change logs and source code must be provided to an independent test lab.

“Therefore, we believe that a reasonable and responsible time frame for the implementation is October 1, 2018, to allow all gaming house operators to be fully compliant…,” Major wrote.

Bastian wrote in his affidavit that Major did not receive a response.

However, in a letter dated July 9, Tynes wrote to Bastian saying, “…This letter serves as a formal notification that the Ministry of Finance has agreed to extend the implementation date for collection of the said tax to Monday, 13 August.”

He added, “To this end, Island Luck is hereby requested to take appropriate measures to submit its point-of-sale system to an independent testing laboratory to ensure compliance with the applicable technical standards…prior to the new implementation date.”

Neil Major, chief compliance officer at Island Luck, wrote to Minister of Finance Peter Turnquest on July 24, explaining that Island Luck had identified an independent testing laboratory – Gaming Laboratories International (GLI) – and that “relevant modifications to the point-of-sale system will not be completed until August 8”.

“Subsequently, GLI has indicated that once the platform is submitted for testing on the aforementioned date, the testing process, which takes approximately two weeks, should be completed by August, 24 and the initial report would be delivered seven days later; August 31,” Major wrote.

“GLI also indicated that the remote signature verification and the release of the final verification reports should be completed by September 7.

“The timeline indicated above is contingent on the fact that there are no unforeseen issues which would require remediation and retesting.”

Tynes again wrote to Bastian on August 7, mandating that he provide a “status update” on the implementation of the stamp tax to Acting Financial Secretary Marlon Johnson “by close of business on Thursday, 9 August”.

Neil Major wrote to Johnson on August 9 and said that there was a slight delay but that GLI “confirmed that the testing should be completed by August 29”.

Major said GLI informed Island Luck that, barring any further issues, a “final verification report” should be completed on September 11.

“Please note that we understand the urgency in this matter and we want to assure you that we are working feverishly to ensure that this process is completed at, or before the dates stated above,” Major wrote.

That same day, at 4:32 p.m., Johnson sent an email to Major only saying: “The go live is August 13, at which time the stamp tax becomes payable.”

In his affidavit, Bastian said Johnson’s revelation was “unfair and done without consultation”.

In response to concerns raised by Major in a follow up email, Johnson sent a second email at 5:52 p.m. saying, “Thank you. As per my earlier email, the stamp tax for the patrons becomes chargeable and payable on August 13.”

On August 11, Crystal Knowles, chief counsel for the Gaming Board, wrote to several undisclosed recipients, “On behalf of Acting Secretary Tynes, I write to advise that Mr. Marlon Johnson…has indicated that the implementation date for the new five percent stamp tax, which is to be levied on patron deposits, has been postponed to Saturday, 1 September, 2018.

“In light of the foregoing, all gaming house operators shall be required to ensure that testing, certification and signature verification of their respective point-of-sale systems is completed by Saturday, 25th August 2018.

“Any operator whose point-of-sale system is not tested and certified by the revised implementation date shall be required to implement a manual system.

“Failure to implement a manual system will result in the operator having to bear the cost of the stamp taxes that are due and payable to the Ministry of Finance. Additionally, all operators shall be required to provide Mr. Johnson with a status update by close of business on Monday, 20th August, 2018.”

Major sent an “urgent” email to Johnson, dated August 16, noting that the new implementation date did not give Island Luck’s programmers adequate time to test, modify and certify its systems.

“…We are concerned that the above arbitrarily selected revised implementation date without consultation… will cause our company to breach certain provisions of the Gaming Act,” Major wrote.

He also made a request for guidance notes from the Gaming Board, the Ministry of Finance and the treasurer regarding 10 process issues.

Johnson, in an August 16 email, responded to four of the issues and said he was “unclear” about two other issues.

“The Gaming Board would have provided you the timelines for your readiness, which would have been approximately three months since the tax was announced,” Johnson wrote.

“The Gaming Board would have also indicated the alternatives for the establishments which are not ready by September 1.

“There are no plans for any further extensions to the deadline.”

As noted, gaming operators took the government to court yesterday seeking an injunction on the stamp tax.

The government agreed, pending a court hearing on October 5, not to implement the stamp tax and not to enforce the sliding scale tax.

Attorney General Carl Bethel said yesterday the government will, in the meantime, hold discussions with gaming operators.

Travis Cartwright-Carroll

Assistant Editor at The Nassau Guardian
Travis Cartwright-Carroll is the assistant editor. He covers a wide range of national issues. He joined The Nassau Guardian in 2011 as a copy editor before shifting to reporting. He was promoted to assistant news editor in December 2018.
Education: College of The Bahamas, English

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