“No Black Box” Is Rallying Call


ST. JOHN’S, Antigua – “No taxation without representation” was the battle cry of the American Revolution. “No black box” is the 21st Century equivalent rallying call for a group of Internet gaming operators in Antigua.

The Caribbean island has become a leading player in an industry – off shore sports books and casinos – that is enjoying explosive growth. In less than a decade, the number of gaming companies doing business there has grown from a handful to several dozen, some of which operate multiple franchises.
As inevitably happens, prosperous companies in a new industry attract government attention as a potential revenue source.

The Antiguan government recently advised the gaming operators that international pressures are forcing them to consider imposing taxes on the industry. Under consideration, it said, was a proposal for a nominal tax on gross gain. This would be administered through a so-called “black box” to track each company’s revenue and transactions.

Industry reaction ranged from concern to outrage, and the leading companies organized a meeting to determine how they might voice their objections and have some influence over the manner in which taxation is implemented.

Friday, a representative number of gaming executives gathered in a meeting room at the Riviera Casino, and the Antigua Off Shore Gaming Association was born.
Many issues were raised and different points of view were expressed. But there was 100 percent unanimity on objection to the use of a black box to monitor their businesses. Privacy and confidentiality are not negotiable, was the consensus.

If the government’s tentative plan were implemented, each company would be required to buy a new server. The attached black box conceivably could extract any information contained in a database.

In calling together the group, the need for expeditious action was explained by one operator, who noted that under existing statutes, the government couldn’t tax the gaming companies. “But if it were fast-tracked, legislation could be put into effect by July,” he advised.

“No taxes, no monitoring, no George Orwellian rules,” asserted one operator.

However, several others noted that the government is concerned with money laundering issues as well as collecting revenue. After much discussion, the general feeling was that paying taxes is unavoidable, and that in the long run, it would have a positive effect through legitimatising the industry.

Trying to determine a company’s tax liability, and how it should be estimated for each segment of the gaming industry, is complex. The operators don’t believe the government is sufficiently sophisticated to write a realistic tax structure without substantial input.

Several operators made the point that the gaming companies are already taxed through licensing fees, work permits, cable and wireless bills, and other charges.
One operator projected how the business scenario will play out:

* There will be some form of taxation imposed on the gaming industry;
* There will be some form of regulation, ideally self-imposed; and
* Companies’ performances will be monitored – but through auditing, not a black box.

According to one operator, black box technology is not yet advanced enough to handle what its vendors claim.
Even if black boxes could do the job, a tax on gross winnings would be better implemented via quarterly audits. “Are we thieves,” asked one operator. “Can we not be trusted?”

Imposition of audits would also assure the fairness of casino games, it was suggested.

One of the sports books asserted that last year, it contributed $2 million to the local economy via employee salaries, telephones, rent and general overhead.
Another operator noted that the leverage the government has on his company is its desire to stay within this jurisdiction. He was hopeful that arbitration could be used to solve problems

Gradually, the concept of a trade association to collectively represent individual companies became the topic. The agreed-upon name was Antigua Off Shore Gaming Association

A board of eight members, with seven voting on issues, was appointed. The following industry segments were represented:
* sports books / online casinos

* casinos
* bingo
* lotteries
* others

Membership charges were discussed with the intention of building a war chest and establishing standards for companies to join.
Hiring of legal counsel was also approved

Members will be sent a data form to fill out and an invoice for Association fees.

A primary objective is to make the government accountable for how it collects and uses taxes. Concern over the stability of an imposed tax rate was voiced. “If it’s two percent today, what will it be in the future?” asked one member.

One suggestion called for a $10,000 tax credit per employee for each sports book. Additionally, the need to write two tax bills – one for sports books, one for casinos – was pointed out.

In agreeing to pay taxes, the Association said it would do so pending the receipt of tax credits for monies already paid.
By organizing the industry, the gaming execs felt they were letting the government know that they were willing to work with it, but felt that they would be taken more seriously and have more influence as a group rather than as individuals.

Finally, the fledgling Association decided to establish its own website, which one of the members agreed to undertake. However, regarding sending emails, several members warned against using addresses with “.ag”, since that address is “wide open”.

Most of the gaming operators are entrepreneurially oriented, although they work within a corporate structure. The meeting was notable for its focus and productivity. When a suggestion was introduced, it would be tweaked and massaged.

Formation of such a group was a long time coming, but it took an issue that appealed to the operators’ primal instincts – survival – to galvanize them into action.
With off shore gaming evolving into a global lifestyle choice, the Antiguan operators might have created a prototype organization to defend an industry’s rights wherever there is government interference. It is unlikely that Antigua will be the last government to look to prosperous off shore companies as a source of taxable revenue.
thedailyspread.com | April 10th, 2000

– – – – – – – – – – – –About the writer
A long time sports betting columnist, Buzz Daly

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