BUSINESS

Bahamas ‘web shop’ tax hikes claim first shop closures

TAGs: Bahamas, bahamas gaming operators association

bahamas-web-shop-closures-taxOnline gambling operators in the Bahamas have begun laying off staff as the government shows no signs of budging on its plans to dramatically hike gaming taxes.

On Wednesday, the Bahamas Tribune reported that local ‘web shop’ operator A Sure Win had announced the closure of 11 of its venues, which offer access to online lottery and casino games via computer terminals. The closures, which will happen at the end of the month, will result in around 50 staffers losing their jobs.

A Sure Win issued a statement blaming the closures on the government’s recent decision to dramatically hike gaming taxes. A Sure Win said its tax burden had gone up 82%, forcing the operator to make some “fundamental business decisions concerning the future sustainability of our operations.

There are seven licensed web shop operators and the Bahamas Gaming Operators Association (BGOA) has warned that the tax hikes could result in the closure of nearly 200 shops and around 2,000 staff layoffs. The government justified the tax hike by claiming that the web shop sector was making obscene profits, a claim the industry vehemently rejects.

According to a Christian Capital Advisers study prepared for the BGOA, Island Luck, the largest operator, recently identified 14 locations and 26 franchisees that were “marginally performing” and would likely have to close under the new tax. That equates to 26% of its shops and nearly half its franchisees.

DOUBLE-DIPPING ON CUSTOMERS
It isn’t just web shop operators who got hit in the government’s new budget. Web shop patrons will now pay 5% tax on their deposits and over-the-counter lottery sales, a move that the BGOA claims will earn the government an additional $13.3m to $20m per year.

The BGOA further claimed that the new 5% tax will cause customers to reduce their gaming spend, which will result in a 15-22% decline in operator revenue, equal to between $26m and 36m based on the sector’s 2017 results.

The BGOA’s attorney Wayne Munroe said last week that that he’d been instructed to follow through on the group’s pledge to file a legal challenge of the tax hike. Munroe also criticized public comments by Financial Secretary Marlon Johnson, who said laid off web shop staff could find work as “housekeepers” or “space cleaners” at the new Baha Mar integrated resort.

GOVERNMENT UNMOVED
Johnson wasn’t the only government figure casting shade at the web shop industry. Last week, Tourism Minister Dinoisio D’Aguilar flatly dismissed suggestions that the new tax would lead to shop closures, but acknowledged that operators “may have to adjust your business” to adapt.

State Legal Affairs Minister Elsworth Johnson claimed that the tax hikes were necessary to offset the damage that gambling causes to society. D’Aguilar echoed this view, observing that “all sins are taxed heavily.”

Some web shop operators had warned that the new tax would simply reduce the size of the licensed industry while fostering the development of an underground, unlicensed and completely untaxed industry.

To this, Attorney General Carl Bethel warned that if operators “go underground, they’ll be dug up,” adding that the government had “a whole arsenal of powers … to deal with persons who decide that they want to break the law.”

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