NASSAU, Bahamas (CMC) – The government of Bahamas has signalled its intention to scrap a five per cent tax on lottery winnings that its predecessor had announced in 2018.

While the so-called patron tax had never been implemented by the Hubert Minnis administration that lost the September 2021 general election, Economic Affairs Minister Michael Halkitis told reporters that the tax had also been a source of legal action, especially by webshop operators and patrons.

The gaming operators had argued that the increase in taxes would cause them to lay off employees and shut down some of their locations.

The government had hoped to implement the tax on patrons’ winnings at five per cent on winnings up to US$1,000 and 7.5 per cent on winnings over US$1,000. The Minnis government had anticipated that it would have collected US$23.1 million in taxes last fiscal year if the tax had succeeded in being implemented at the beginning of 2021.

“That patron tax, as far as I know, had not come into effect and so we decided that we will do away with it. As you know, it had been the source of legal action as well as a lot of debate, so we decided we’ll just do away with it.

“The gaming industry, if you look at it in terms of their taxation, not only versus casinos but versus other businesses, is very, very heavily taxed and so we believe that it’s just better to do away with it,” Halkitis told reporters.

Meanwhile, financial secretary Simon Wilson, said the move to scrap the patron tax is because the International Monetary Fund (IMF) has found that the sector is over-taxed, adding that any further taxation of the sector could result in non-compliance from gaming companies.

Wilson told the Nassau Guardian newspaper that the gaming sector is now the most “healthy tax sector in the country” and that the government would be doing itself an injustice by imposing further taxes on gaming house owners.

“If you read the IMF report on taxes, what it points out is the gaming sector of The Bahamas is the most healthy tax sector in the country, at rates maybe six to seven times that of any other sector in terms of profits,” said Wilson, adding “when you look at that and you realise that if I’m taxing one sector at this level, what it’s going to do is create more problems with compliance for the government.

“People will start evading tax by going to elicit gaming or not reporting and so forth. So from a Ministry of Finance perspective, we made the recommendation that perhaps in terms of net impact of this patron tax and we look at the counter factors, it may not be a prudent thing to go ahead with this,” Wilson said, noting that the government has never collected a patron tax from the gaming sector because of the litigation process.