By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading businessman believes the legalisation of web shop gaming will be “a game changer” for the Bahamian economy and government finances, and called on ‘legitimised’ numbers operators to help “self-police” the sector.

Franklyn Wilson, the Arawak Homes chairman, said the “magnitude” of such a move was highlighted by the fact that not even the $2.6 billion Baha Mar project’s potential impact had prompted the Government to say it would reconsider its Value-Added Tax (VAT) plans.

Michael Halkitis, minister of state for finance, indicated last week that the Government might tweak its VAT plans if significant revenue inflows from a legalised web shop gaming industry materialised.

“It’s harder to get much bigger than that,” Mr Wilson told Tribune Business of the Minister’s remarks. “The reality is that this is a game changer, a material event.

“One has to see it as very significant. A project the size of Baha Mar did not cause the Government to say they need to revisit the new taxes. That gives you a sense of the magnitude; it’s huge.

“It certainly represents a change in the economic order, so from that point of view it’s very material.”

Current estimates suggest the Government might earn between $20-$40 million annually from a legalised web shop gaming industry, sums that would be between 10-20 per cent of the net $200 million revenue increase projected from VAT. Much, though, depends on the tax structure the Government would impose.

Mr Wilson, meanwhile, suggested that the economic benefits from legalising web shop gaming would spread beyond just the Government’s fiscal position.

He suggested that a legitimate industry would be able to deposit its considerable earnings within the Bahamian commercial banking system, vastly expanding the capital pool available to fund productive investment projects.

“From what I understand, the level of economic activity in the country is heavily influenced by the challenges the numbers industry has in getting money into the banks,” Mr Wilson told Tribune Business.

“The extent to which that is a problem, ones has to expect that just regularising the flow of money into the system will be a boost to the economy.

“I don’t think we’re talking about nickels and dimes that these fellas are doing. If the Government can anticipate they’ll get revenues at the level that will cause them to take another look at VAT, you’ve got to be talking about fantastic sums of money.”

With all forms of gambling currently illegal for Bahamians, web shops are currently considered as ‘money laundering risks’, with commercial banks refusing to accept their monies.

Central Bank governor, Wendy Craigg, and others have warned about the risks the web shop ‘status quo’ represents to the Bahamas and its reputation, with operators investing their profits in real estate developments and what is perceived in some quarters as a ‘parallel’ banking system.

Mr Wilson added that in return for the Government (and Parliament) legalising the web shop industry, those ‘legitimised’ operators would have to help regulators - likely to be the Gaming Board - police it.

“If you had a problem policing it before, there’s a risk a new set of guys come up and go underground,” he told Tribune Business.

“To some extent, those legitimised through this process can help this thing by helping the state protect against breeding a new category of people going underground.”

Taking this a step further, Mr Wilson said compliant web shop operators would have to play a role in exposing rivals who failed to pay their due taxes, likening this situation to importers and Customs brokers.

“To some extent we will have to look to new, legitimate web shop operators paying their taxes to protect the state against those that do not want to pay,” he explained to Tribune Business.

“From time to time, Customs catches people bringing in stuff illegally, as people paying their taxes report them.

“That’s how Customs catches crooked importers, and to some extent we’re going to have to depend on legitimate web shop operators to catch those who aren’t.”

Much remains to be done before a legalised, taxed and regulated web shop gaming (numbers) industry becomes a reality. For starters, it is possible Cabinet may reject the recommendations brought to it by Obie Wilchcombe, minister of tourism, or require them to be significantly reworked.

The draft Bill, when completed, will have to be passed by both houses of Parliament. While the Government’s significant majority will likely ensure that happens, the politicians will likely be subjected to a sustained lobbying campaign by the churches and those who successfully voted ‘No’ in last year’s opinion poll.

Mr Wilson said he had “no idea” what tax structure the Government would propose for the web shop industry, but said it could draw on work done under the former Ingraham administration, plus the regulatory experience in other countries.

The previous government is understood to have looked at a $1 million licence fee for all web shop operators. The industry itself has urged the Government to tax its winnings, not players or their gross income, but given that gambling is perceived as socially harmful - like alcohol and tobacco - many observers are likely to argue that the players themselves should be taxed.

Previous studies have indicated that the web shop industry takes in around $400 million gross turnover annually, or more than $1 million per day.

Mr Wilson also said he was unsure whether having a National Lottery, or a legalised web shop industry was “an either or proposition”.

He added, though, that the Government had to be careful that, in legalising the web shops, it did not appear to be “condoning gambling”.

“Gambling breeds poverty,” Mr Wilson said, adding that the Government would also have to “reconcile” last January’s ‘No’ vote, and the expectations of persons who voted that way, with the action it was now contemplating.