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The way forward on gaming taxes

When the government announced the new sliding scale and patron taxes for the local gaming sector in the last budget, there was uproar from some in the industry. They said they’d have to lay off hundreds of staff. They organized and had people marching in the streets.

The histrionics made no difference. The government still proceeded.

What brought the Minnis administration to the table to talk was the case of the gaming houses before the Supreme Court challenging the legitimacy of the taxes. It will now forever be unclear what the outcome would have been, or if the case had merit, as the government and gaming houses have reached consensus.

Our slow, backlogged court system always gives advantages to those with the money to drag matters out. Hence, a government that wants more revenue now is likely to come to an agreement rather than wait five, six, or seven years – a time frame that spans beyond the next general election.

The government won’t get what it was hoping for, but it thinks it will get more than it collected in the past.

The government said yesterday it will collect about $35 million annually from a new sliding scale tax on net taxable revenue, and $15 million from a tax on winnings as a result of lottery bets.

With a retroactive start as of January 1, 2019, the government expects it will collect 15 percent on up to $24 million earned in revenue from gaming house operators.

Gaming house operators will pay an additional 17.5 percent on revenue over $24 million from January 1, 2019.

Winnings from lottery bets will be taxed as of April 1, 2019.

Five percent will be paid on winnings up to $1,000, and 7.5 percent will be paid on anything greater than $1,000.

There will be no tax on the winnings of casino games, such as “spinning”.

The formerly proposed sliding scale tax would have resulted in gaming house revenues up to $20 million being taxed at a rate of 20 percent; between $20 million and $40 million being taxed at a rate of 25 percent; between $40 million and $60 million being taxed at a rate of 30 percent; between $60 million and $80 million being taxed at a rate of 35 percent; between $80 million and $100 million being taxed at a rate of 40 percent; and more than $100 million being taxed at a rate of 50 percent.

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

“The government had two objectives going into the most recent round of negotiations: to ensure the industry pays its fair share of taxes, and to end the deadlock between the government and the gaming industry.”

This is the first increase in taxation for the local gaming sector since it was legalized by the last Christie administration. The agreement sets a new taxation framework.

Though the government partially backed down, the owners of this sector should accept Parliament’s right to tax and their responsibility to pay. We doubt this administration will raise these taxes further this term, but future one’s may.

Launching pointless court challenges in an effort to tie up the matter and block the move by default could cause a future prime minister to choose the nuclear option: shutting down the private local gaming industry and starting a national lottery.

The gaming house operators should not feel giddy as a result of this outcome. In our system Cabinet is the functional executive and Parliament makes the laws. Being rich makes no one on these islands more powerful than the bodies given constitutional power to govern the Commonwealth of The Bahamas.

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