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Betting on change - Gaming industry to get regularised
Minister in the Ministry of Finance Vasant Bharath says the Government will soon establish a gaming authority to monitor, evaluate and track all the establishments that engage in gambling activities, including the country’s casinos, which are called private members’ clubs.
Speaking in an interview with the Business Guardian, Bharath said the gaming authority would be the regulatory body that would govern all establishments under the gaming industry namely private members club, horse racing pools, casinos and betting houses.
The gaming authority is not a replacement for the National Lottery Control Board (NLCB) or the Finanacial Intelligence Unit(FIU), he said.
Bharath stated that once the new legislation is passed, it would allow the gaming authority to bring all these gambling establishments under one umbrella.
Currently, these different establishments are registered with the FIU under different Acts. For example, according to the FIU website, the gaming houses and betting pools and any such business are registered under the Gambling and Betting Act. For the national lottery online and betting games, the business of lotteries is operated in accordance with the National Lotteries Act and the private members’ club falls under the registration of Clubs Act.
Last October, during the 2013 national budget presentation, the Minister of Finance Larry Howai announced that the Government was seeking to take more effective control and to capture more fully the revenue generated by private members’ clubs.
He said the Government was seeking to introduce regulations to manage the gaming industry by May 1. In the interim, however, Howai said the Government would increase taxes levied on private members’ club.
Howai’s announcement resulted in opposition from some of the owners of gambling clubs, stating that the increase in taxes would result in the closure of some of the clubs and loss of jobs.
The flat increased taxes announced in the budget were implemented on October 1, Bharath said.(see box).
“However, with the new legislation, once implemented would also allow the Government to re-adjust those taxes by applying separate taxes to each machine or table, which would be monitored on a regular basis.”
“The industry must be regularised because too many of them are springing up all over and they are loosely managed and the new gaming authority would form part of this new regulatory structure,” Bharath said.
He explained that legislation must first be brought to Parliament because it would give the relevant state bodies the authority to enter premises, track revenue and collect taxes.
Bharath said before the 2014 budget, the Ministry of Finance is hoping to have all gambling enterprises of the clubs, not only the private members clubs but horse racing clubs, betting pools and casinos and all establishments with gambling activities brought under the new legislation.
The new legislation would do two things:
• Ensure there are legal practices taking place;
• Ensure that the government can collect taxes on the activity
“We are looking at several options in how we should proceed with this. We want to get to a point where we just don’t charge a flat tax to every casino because everyone differs in terms of the revenue they make.”
He explained that one way the Government could collect the tax is through the actual amount of money earned via the gambling machines.
“For example, every time you pull a handle, it rings up the money spent. It’s just like a cash register. Then you check the receipts at the end of the day. It is not a difficult thing to do, it’s just a question of which system is relevant for T&T.”
Bharath said they have accepted the gaming industry is well established worldwide and that it generates jobs, billions of dollars in tax and economic activity. And it is affiliated with the tourism market, “so it is one that we would want to encourage with a proper structure.”
All for regularisation
Notwithstanding the concerns about increased taxes, there is a general consensus among most stakeholders that the gaming industry needs to be regulated.
In a telephone interview on Monday, Sherry Persad, the president of the Private Members Club Association (PMCA), said they are in agreement with the Government to have the industry regularised.
Currently, she said, the only organisation that monitors the gaming industry is the Financial Intelligence Unit (FIU), the institution established to combat money laundering and terrorist financing.
Persad, who is also the human resource manager at Mau Pau’s, said it is the law for each club, betting pool or casino to be register with the FIU. Failure to do so can result in huge fines.
The private members’ clubs are also required to report any suspicious activity and failure to do so, as well, will result in penalties.
She said PMCA has quarterly meetings with the FIU, where they are also trained in detecting money laundering, counterfeit and suspicious activity.
Officials of the FIU may visit from time to time to ensure these clubs are complying with the rules.
Persad said: “We want to be regularised but with that comes increases in taxes, which would affect most of the smaller gaming clubs.”
She argued that she was uncertain if the Government would really benefit from the increased taxes.
In order for the small companies to deliver on the new regime they may have to resort to reducing their inventory of gaming machines and equipment.
Persad said when this happens it would reduce the amount of revenue earned and result in less taxes collected.
She said the association has been meeting with the Finance Ministry to further discuss employing proper mechanisms for regularisation and appropriation of taxes. The ministry is in the process of drafting another proposal on the way forward and gave them the assurance it would meet with the association and its union—Union of Members Club and Lottery Workers—before it proceeds with any final decision on the regularisation of the industry.
Betting down 40 per cent
Peter George, president of Sportsman Management Committee, said he is also in agreement with the Government regularising the industry.
Sportsman Club has approximately 400 members which comprise middle to upper class and is 16 years old this year.
He said the club is able to meet its tax requirements because of the kind of membership it has, but other clubs that have less well-heeled members may encounter some difficulty.
The economic downturn, he said, has had an impact on the industry, which would put further strain on some clubs to meets their tax requirements.
George, who is also a co-partner of Fair Chance Racing Club, Queen St, Port-of-Spain, said: “In the betting shop business the average betting volume has been down by 40 per cent in the last two to three years.”
He said his businesses have had to employ several survival strategies including reducing capital expenditure and salaries and managing wastage.
He noted that it is a very competitive industry and some private members’ clubs were struggling just to meet their overhead expenses.
“There about 75 to 80 private members’ clubs, but good customer service, good treatment to staff and proper facilities are key to being competitive.”
To also remain competitive, George said clubs offer different incentives such as special cash prizes for best hand and weekly and monthly complimentary prizes of $500 or more for the person who spends the most money.
He said Fair Chance is 15 years old and he has managed to keep employees as old as the company.
How clubs make money
George said the gaming industry is a very challenging and risky business. You can either lose or win.
He said at the PMC there are various games, but each one carries a certain percentage you can make.
George explained that each game has a particular mark up on it and it varies depending on the machine.
He noted some machines have as low as four and six per cent mark-up while others may have ten or 12 per cent.
George said profit or loss is then calculated at the end of the year based on an average percent of volume.
If you lose at the end of the year, you would try and recover it in the following year, but usually a club should end up in the black.
But this money does not go into the pockets of any individuals, he said.
“The way the laws are framed these clubs do not have owners, they are run by a membership. The money is not supposed to be distributed as a business, some may use it for new equipment and the balance held for future improvement of the club for the benefit of the members.”
In the 2013 budget, Finance Minister Larry Howai said, effective October 1, 2012, taxes paid on gaming tables and other devices by private members clubs would be increased as follows:
1. for every Baccarat table/device
$50,000 per annum
2. for every Black Jack table/device
$60,000 per annum
3. for every Caribbean stud poker table/device
$75,000 per annum
4. for every dice table/device
$35,000 per annum
5. for every regular poker table/device
$30,000 per annum
6. for every pool table/device
$2,000 per annum
7. for every roulette table/device
$60,000 per annum
8. for every rum 32 table/device
$75,000 per annum
9. for every sip san table/device
$75,000 per annum
10. for every slot machine/online gaming device
$12,000 per annum
11. for every other table or device
not mentioned above
$30,000 per annum
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