1. Taxation in Gambling: Is it fair?
Londani Mathavhane
Snr. Manager Compliance
Limpopo Gambling Board
The Chairman of GRAF, the President of IAGR, Distinguished delegates, ladies and Gentlemen. Greetings to you all.

2. Presentation Outline Introduction Legitimacy of Tax Regimes
Types of taxation
Different methods of taxation
Tax Burden
Benefits of Taxation
Focused vs. General Govt. Spending
Conclusion
Outline of the presentation

3. Introduction
It can be said that today in many Jurisdictions Gambling is now to a great extent accepted by society as a means of entertainment. Thus it can reasonably be said that the debate on whether or not to legalize gambling is over; however, it does not necessarly mean that all is hunky dory.

4. Objectives of regulating gambling
Introduction
Objectives of regulating gambling
Protection of society from overstimulation of latent gambling
Protection of players and integrity and fairness of the gambling industry
Uniformity and harmonization
Generation of revenue for the Government and for good causes
Economic empowerment
Promotion of economic growth, development and employment
In many Jurisdictions gambling was mainly legalized to at least achieve these objectives: REFER TO SLIDE

5. Introduction
Having said that, Benjamin Franklin once said “In this world, nothing can be said to be certain except Death and Taxes”, now this is irrespective of your background, your affiliations, how rich or poor you are, which country or community you come from; those two things are death and Taxes. The same saying is also applicable to businesses, at some stage a business is bound to die, be it through mergers and acquisition, insolvency or not keeping up with developments. At the same time whilst a business is still operational it will pay some form of tax.

6. Introduction
So we know by now that tax is inevitable. What remains is how much is tax is enough, reasonable or fair. We are going to try and answer that today, one would hope that this shall spark a debate on the matter in our respective jurisdictions.

7. Legitimacy of Tax Regimes
National Government
Local/Regional Government
Community
People or Business
As people and businesses we find ourselves living or operating in a Community, which is governed by some local or Regional Authority ; and also find ourselves subjected to the policies of a National or Federal Government. The government is mandated to provide certain products and services to the public in a sustainable way. In order to achieve this the government needs money, which is mainly raised through taxes, borrowings and other means.

8. Legitimacy of Tax Regimes
Pay Tax
National Government - Taxes
Local/Regional Government - Taxes
Community - Tax
As a result all these spheres of government impose some form of tax on businesses and individuals to raise money.

9. Types of taxes Individuals Business
Consumption tax :VAT, travel, local taxes
Income tax
Dividends tax
Community tax
Gaming taxes
Business
Corporate Income tax
Gaming tax
Local taxes
Value Added tax
The taxes come in different forms and rates. REFER TO THE SLIDE.
For individuals it may not necessarily be an additional burden to pay gaming taxes considering that generally you have to pay tax on all income that you, with some exceptions.
But as for businesses in the gambling industry they are already paying many other forms of set taxes set taxes,, depending on the form of business, REFER TO THE SLIDE. And Gamibg tax is more of an additional tax burden.

10. Different Methods of Taxing
Gaming tax on individual gamblers
Gaming tax on Sports Betting is based winnings
Other forms of gambling:
Gross Gaming Revenue
Gross Betting Revenue
Turnover
Paid by the Gambling operator
In the space that we are operating in individual and businesses are subjected to additional taxes in the form of Gaming taxes, this also include individual gamblers. For e.g. in South Africa in Sports Betting, Punters pays gaming tax on the winnings; whereas, in other forms of gambling, gaming tax is paid by the Gambling operator based on Gross Gambling Revenue, Gross Betting Revenue or Turnover, depending on which Jurisdiction you operate. Is this fair to the punters and the Gambling Operators?

11. Tax Burden Gambling Operators Corporate Income tax - 28%
Value Added/ Sales tax – 14%
Local government tax - %
Travel taxes – 1%
Employee taxes -%
Gaming taxes - 8%
A Gambling company in South Africa is required to pay REFER TO THE SLIDE.

12. Tax Burden Casino Operator
Corporate Income tax - 28%
Gaming taxes - 8%
Total corporate tax 36%
Manufacturer or Supplier of Gaming Equipment
Only pays Corporate tax – 28%
No gaming Tax
Is it Fair?
Is imposing additional gaming taxes to a Gambling operator who is already paying other forms of taxes fair?, considering that other companies in the same industry, such as manufacturers and Suppliers of gaming equipment, and companies in other industries do not pay additional taxes.
For e.g. A Casino Operator in Limpopo Province in South Africa is required to pay corporate taxes plus gaming taxes. REFER TO THE SLIDE. Why doesn’t the Manufacturer of gaming equipment pay a further gaming tax on Gaming Machines and equipment sold. After all we established earlier that one of the objectives of regulating gambling is to generate funds for the government. Are these disparities good for attracting and keeping investors in the Gambling industry? Is this good for the government, is the government not losing revenue by not taxing manufacturers and Suppliers of gaming machines and equipment?

13. Tax Burden Deterrent to a potential investors.
Taxes are good for the government coffers
Strike a balance between:
imposing reasonable tax rates ;and
collecting enough money for good causes.
I may not the have the answer, but 36% tax rate can be a deterrent to a potential investor. The potential investor would rather invest in another industry whose effective corporate tax does not amount to at least 38%. On the other hand such taxes are good for the government coffers as it can be used for the benefit of the public. The government thus needs to strike the sustainability balance between imposing reasonable tax rates and collecting enough money for good causes.

14. Benefits of Taxation Business Public Government Revenue
Service Delivery
Economic, Development & Growth
Employment
Empowerment
Business
Profits
Government Services
Infrastructure
Business Opportunities
Economic Growth
Public
Education
Health e.t.c
Community development
Benefits that arise out of the government collecting more gaming taxes

15. Targeted Use vs. General Govt. Spending
Focused
Impact
Insufficient funds
Appreciated
Govt. Spending
Government coffers
General Use
Not related to Gambling
Considering the Stigma that Gambling still has in in some sectors of society, it is important to consider how the gaming taxes collected can be used to counter-balance that stigma effectively. Currently in most jurisdiction gaming taxes are collected and spent generally just like any other tax revenue collected. As a result the public is unable to relate the government services and infrastructure to the proceeds from Gambling taxes.
Perhaps the better option would be to have the gaming taxes used on specific projects aligned to the National or Regional agenda/ objectives such as Education, Sports, Infrastructure. In that manner the public can then see what the industry brings to their community, and have different view on gambling.

16. Focused or General Spending
Conclusion
Public Benefit
Government
Regulation
Taxes
Focused or General Spending
Depending on from whose perspective you look at gaming taxes, gaming tax can be regarded as the necessary evil from the perspective of the public and the government since they stand to benefit from the spending of the taxes. To the Operators, and maybe the Manufactures and Suppliers, it may be seen as an unnecessary and unfair tax which eats into the their revenue and profits after tax. It can also be said that it hampers Capital Development in that due to less profits after tax and effectively less reserves Operators have to wait longer to gather enough reserves for further investment, else they have to resort to Credit funding.

17. Conclusion Tax is inevitable Authorities need to set reasonable tax
Consider Standard tax methodology
Per Sector
Consider Dynamics of each Jurisdiction and Industry
Use funds for dedicated projects
For Public benefit
To deal with gambling stigma
From the presentation we can conclude further that:

18. Conclusion
If we can achieve objectives of Regulating Gambling set out earlier, through the collected gaming taxes, It can reasonably be concluded that gaming tax is Fair
SLIDE

19. Conclusion

20. The End

21. Thank you
Londani Mathavhane Snr. Manager: Compliance Limpopo Gambling Board Limpopo Province , South Africa