Antigua mulls changes to online gambling rules

Antigua mulls changes to online gambling rules

antigua-online-gambling-changesAntigua has proposed new rules and taxes for online gambling operators that unfortunately could have the opposite effect of what the government hopes to achieve.

The Antiguan government’s Financial Services Regulatory Commission held a Gaming Sector Meeting last Thursday, which was attended by four of the eight companies currently licensed to operate online gambling in the country.

The government has proposed a new Gambling Act of 2016 that is primarily aimed at regulating land-based casinos, although the 2007 Interactive Gaming and Wagering Regulations will be folded into the 2016 Act.

A new Gambling Authority Division will be established to handle licensing and monitoring of all gambling on the island, including the online sector. The government proposes to introduce “an appropriate monitoring system and mandate monthly reports and/or data,” with the “reasonable costs” of this monitoring to be borne by the licensees.

A TAXING SITUATION
Antigua has proposed a tiered tax structure for online operators based on the number of local staff on their payroll. Companies with four or fewer local staff will pay 5% of their gross gaming revenue (GGR). This rate will slide to 4.5% for companies employing 5-30 locals, falling again to 3.5% for employing 30-100 locals, and 2.5% for companies employing over 100 locals. All operators would face a tax cap of $750k per annum.

Antigua is also looking to impose new license fees, with concessionary rates for new companies to assist their commencing operations in Antigua. The country has set a goal of boosting its number of online licensees by at least one in 2017, which the government hopes will add 250-300 new jobs to the economy.

With respect, Antigua’s tax proposal presents significant impediments to its goal of attracting new online licensees. Gross gaming revenue from Antigua’s online licensees rebounded in the past year following multiple years of declines, yet margins have grown smaller due to the higher cost of doing business.

Antigua’s proposed tax structure compares unfavorably with that of other leading online licensing jurisdictions, including Malta, which charges €8,500 per year in fees and caps annual tax contributions at €466k ($495k), while Gibraltar charges its licensees 1% of betting turnover capped at £425k ($539k) per year and 1% of online casino revenue.

Antigua lost 187 licensees after the United States blocked Antiguan-based operators from accessing the US market, a move that has been ruled illegal by the World Trade Organization. Increased taxation won’t help reverse this trend.

The government should instead focus on job creation, which will have a much greater impact on a small economy such as Antigua’s. The online industry is a pure exporter, meaning every job created in an online gambling call center is a direct injection of new money that will circulate and sustain the local economy far better than direct taxation.

DORMANT ACCOUNTS
Antigua is also proposing to require licensees to identify all “abandoned” aka dormant gambling accounts every six months and remit these funds to the government. Licensees would be allowed to apply a one-off administrative fee of up to $120 on accounts identified as dormant but the rest would go to the government.

This policy is equally ill-advised. The companies covered the overhead of acquiring these accounts and in most cases will honor withdrawal requests even years after the accounts have been deemed legally dormant. The government is unlikely to honor these late-arriving requests, making the current system far more aligned with player interests.

BITCOIN
The new rules directly address the issue of Bitcoin and digital currencies, proposing that greater customer due diligence (CDD) and know your customer (KYC) requirements be performed once a customer’s Bitcoin deposits exceed US $500, or if a withdrawal request is made.

Here again, no new regulation is needed. Bitcoin can be handled using existing KYC rules. Governments should resist the temptation to pile new rules onto every new technological development if existing rules are more than satisfactory.