It is about a rate change and changes in the calculations of the gaming tax.
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Introduction
In January 2023, the Turks and Caicos Islands Government made amendments to the Gaming Control and Gaming Machine Ordinance. The Opposition has made a public statement on these amendments stating that it is benefiting the Operators and detriment to the country. The Opposition also encouraged the public to read the amendments so that they really know what they are about. Therefore, I took the challenge on by reading the amendments, asking questions, and listening to the presentation made by the Premier and so I am sharing my understanding of the amendments in this article.
I must admit I know very little about gaming industry. I also debated whether to write about this since I have never gambled nor do I believe in it. However, due to my platform in educating the public, I have decided to write this article. I believe Governments have do better in educating the public about the bills that are presented to the House of Assembly. I believed I have said this in previous articles, that each representative should meet with their constituency and explain the bills that are being presented in the house because not everyone listens to the radio and a meeting will give the constituents an opportunity to ask questions and gain a better understanding of the bills.
The purpose of the amendments.
It appears that the main purpose of the amendment is to calculate the taxes based on adjusted gross receipts. Prior to that, the taxes were based on the drop box recovery method. Under the drop box recovery method, the casino operators were obliged to pay taxes on the money that passed through the machines. Even if a machine makes a loss, the casino operator was required to pay taxes on the money that dropped through the machine.
Under the Adjusted Gross Receipts method, the Casino Operator will pay taxes on the revenue less the winnings payout.
If you are still unclear, let me break this down further. For example, if a gaming machine collects $100,000 and pays out winnings of $150,000, the casino operator loses $50,000, however the casino operator must pay the taxes on the $100,000 under the drop box recovery method. Under the gross adjusted receipts, the casino operator would not have to pay any taxes in this example because his winning payouts are more than what the machine collected.
Now, if the gaming machine collects $100,000 and pays out winnings of $25,000, under the drop box recovery method, the casino operator would have to pay the taxes on the $100,000. Under the gross adjusted receipts, the casino operator would have to pay the taxes on $75,000 ($100,000 less winnings of $25,000)
Another amendment involves a revised rate on the calculation of the taxes.
Does the Casino operator benefit?
With these amendments, the Casino Operators do benefit in two ways. One the tax rate is reduced, and the other benefit is that the casino operator pays on gross adjusted receipts so if there are losses on the machines, the casino operator does not pay taxes. Prior to the amendments, the operators were paying taxes even if the payouts were greater than the receipts.
Is this why the rate was reduced? Was it reduced to compensate the casino operators because in the past, they were paying taxes on the drop box method rather than the adjusted gross receipt method. So yes, the casino operator will benefit under this amendment.
Gaming Tax is different from the accommodation tax.
The gaming tax is different from the accommodation tax. An accommodation taxi is charged to the consumer and collected by the operator who in turn pays it over to the Government. The Casino tax is paid by the Casino operator and then paid over to the Government. Therefore, it is an expense of the Casino Operator, and it is not taxes collected from the players.
Budgeted Gaming Machine Tax
According to the Budget, the gaming machine tax is expected to be $6,025,000 for the year ended March 31st, 2024. I cannot say what the revised gaming machine tax would have been with these amendments as I don’t have knowledge of the expected winnings and payouts. However, I mentioned the budgeted figure so that viewers will have an idea what the revenue from the gaming machines entails.
For simplicity’s sake, let’s assume there were no winning payouts. With gaming tax of $6,025,000, and a tax rate of 35%, we can say the gross receipts were $17,214,286 ($6,025,00/35%). Now let’s say the rate was reduced to 30%. In this example, the gaming tax would be $5,164,286. This would result in a reduction of $860,714 in gaming tax revenue.
International Standards
The Government has argued that these amendments are in line with International Standards particularly in places like Singapore, Australia, and Nevada. I did not verify how these countries calculate their taxes.
Conclusion
Based on what you have read, do you think the casino operators should be paying taxes on losses. Do you think casino operators experience losses from the gaming machines?