NEW INTERNET GAMING REGULATIONS AND 3% TAX ON NET WINNINGS INTRODUCED IN ANTIGUA

[The Major]

(Antigua Offshore Gaming Association, St. Johns, Antigua)

NEW INTERNET GAMING REGULATIONS AND 3% TAX ON NET WINNINGS INTRODUCED IN ANTIGUA

The AOGA, an association representing the interests of the Internet Gaming industry in Antigua, has endorsed Regulations Concerning Interactive Gaming and Interactive Wagering established by the Government of Antigua and Barbuda on 22nd May.

In April, the Government had also introduced a 3% tax on net winnings. However, before applying the tax, the Government offered the Industry an opportunity to discuss its structure and implementation. Over two days of discussions in an atmosphere of cordiality and cooperation, the AOGA and the Government reached an understanding that was mutually satisfactory.

The government priorities, clearly stated by Sir Ronald Sanders, the Antigua and Barbuda High Commissioner in the United Kingdom and the country’s lead negotiator at the OECD and International Financial Task force, were to implement regulations that met the highest international standards against money laundering, and to ensure that jurisdiction promoted fair and responsible gaming practices. The industry fully supported those priorities and the AOGA is satisfied that, with these regulations in place, Antigua will extend its lead as the premier jurisdiction for high-quality Internet gaming providers.


HIGHLIGHTS OF REGULATIONS:

The new Interactive Gaming Regulations require operators within the jurisdiction to:
· Know the player and ensure that monetary transactions are monitored in accordance with global standards on money laundering
· Provide for timely payouts to customers
· Implement control systems to provide for secure audit trails
· Provide arbitration methods for dispute resolution
· Guarantee the suitability of each company’s owners and operators for the Gaming Industry


HIGHLIGHTS OF 3% AND DEDUCTIONS:

A 3% Tax on the Net Win of each company will be implemented, retroactive to April 27th, 2001. Net Win is defined as the amount wagered by customers, minus winnings by customers. This tax will be payable quarterly, and is levied in addition to the existing ‘annual licensing fee’ of $75,000 for Online Casinos and $50,000 for Sports Books. Licensees will be allowed to deduct software-licensing costs of up to 40% from the Net Win in each quarter. Additionally, Licensees will be allowed to deduct the Charge-Backs (customer billings which have not been honored by the customer) from the Net Win.

This tax will provide Antigua with a way to profit directly from the growth of the top-quality Gaming Operators on the island, and to increase its tax base with the growing prosperity of local providers. This equitable taxation structure creates the foundation for a long-lasting Partnership between Antigua and the Gaming Industry.

The Government of Antigua and Barbuda has made a commitment to maintain the licensing and tax structure for a fixed period of time in order to provide the Industry with the predictability it requires to further invest in its growth on Antigua. This commitment is key to the success of the partnership between Industry and Government.


HIGHLIGHTS ON OTHER ISSUES:

The Government accepted the Industry’s proposition that in the short- and long-term, Antigua will need to make certain improvements to the local infrastructure, as well as continued improvements in the cost-effectiveness of telecommunications, in order for the providers to remain competitive. The Government agreed to work with the Industry to resolve the following issues:

· Improvements to the responsiveness of the local telecommunications provider by the establishment of a response team dedicated to the Gaming Industry

· Continued focus on cost-effectiveness of telecommunications services


CONCLUSIONS:

The AOGA feels that Antigua now has a solid regulatory framework that will foster the continued growth of the Industry and safeguard the jurisdiction from money laundering and other financial crime.

The Industry, through the AOGA, will continue to pursue the improvements in terms of infrastructure and cost-effectiveness of services which are required if the Gaming Industry on Antigua is to enjoy long-term prosperity and growth. The Government is pledged to work with the Association to attain this goal.


Appendix

QUOTES:

· Regulations mark a milestone in evolution of Internet Gaming industry and position Antigua as a leading jurisdiction for I-Gaming in an increasing competive market, with as many as 50 other jurisdictions around the globe having some form of licensing for Internet Gaming.

· The negotiations forged the beginning of an open and constructive working relationship between industry and government.


· We are pleased that there is now a direct correlation between the success of our businesses and the revenues accruing to the government. If we do well, Antigua will do well.

[The Major]

This is a huge tax when you look at the margins the books are operating on. Will be interesting to see who relocates, if any.

Net winnings???? ya right, the way they describe it I would call it gross profit.

TM

Typical government behavior. Steal from the enterprising and successful and line your own pockets. If I owned a sportsbook in Antigua and got stuck with this tax, I'd relocate my book in a heartbeat.

[3putt]

If a book beats its customers for $1 million, it has to pay the government $30,000. Big deal.

[blackchip]

If the sportsbook wins a million and his expenses are $925,000 how does that $30,000 feel now 3putt?

[cubs]

Seems to me that it will hurt the antiguan companies. Gamblers will simply play with books elsewhere.

[sandwedge]

the costa rican chamber of commerce probably is whole-heartedly in support of Antigua imposing this tax.

[The Major]

Cubs, It is not a tax on the player. It is a tax on the bookie. It should not affect the player. As Reno says, many may relocate quite quickly.

The Major

[3putt]

I think you've got to look at it in the context of the overall package. Believe it or not, a responsible government can add a lot to a book's appeal. I think everyone feels a little safer playing in a place like Vegas or Australia because you believe some government agency of reasonable repute is ultimately in charge and won't allow scams to be perpertrated.

If the Antiguan government does set up a credible system that ensures payment and fair dispute resolution then I think the tax would be a small price to pay and could add to the sense of a book being solid and legitamately regulated.

You got to admit it's better than governments that sell licences for $100 and don't give a rats ass what happens after that.

[blackchip]

<BLOCKQUOTE>quote:[/size]<HR>Originally posted by 3putt:

You got to admit it's better than governments that sell licences for $100 and don't give a rats ass what happens after that. [/b]<HR></BLOCKQUOTE>

They sell them for 50k now and don't give a rat's ass. This is nothing but greed by a poverty stricken nation. I really cant see a positive here at all. WWTS, WSEX and Starnet could simply relocate to CR and pay $200 for a business license and be done with Antigua. I wonder if the Antiguans thought of that. 3% of zero is zero.

[flanzy]

Nice post 3putt. I agree wholeheartedly. If the government sets up a responsible system of regulation, then I as a consumer am going to favor the Antiguan book over the book from a less regulated jurisdiction (say, Costa Rica, for example), and the increased handle from me and others of similar ilk is going to more than make up for the 3% tax, on winnings only, that the book is paying. Major, I think your suggestion that the overhead to win $1,000,000 could approach $900,000 has to be out of whack. While there are clearly expenses, the internet has to be a relatively cheap forum for running a business, and the book can't, I would presume, be incurring expenses that high (unless they are paying their employees, perhaps shareholders, salaries that are simply way out of balance, but then that wouldn't be real cost of doing business, would it?). Anyway, I think the Antiguan government should be applauded for its efforts. BTW, is there a list of books that are operating out of Antigua?

[bbuster]

you guys would be real surprised if you knew how much some of these books spend monthly on internet and phone connections, its not some $19.95 dial up or $39.95 cable modem. The infrastructure costs to setup and run an online sportsbook are alot more than a novice would suspect.

[MarkDel]

Major,

Good job posting this here...now I'm starting to remember the REAL REASON I chose Belize instead!!!!!!!!!!!!!!

BBuster,

Thanks for pointing that out, until you've been on the bookie end of this, people have ZERO concept of the cost involved with bandwidth, phones, etc...

BlackChip,

YOU HIT THE NAIL RIGHT ON THE HEAD!!! This is simple greed, flavored with a tiny bit of stupidity, and a heavy dose of short sighted thinking. But if there's one thing that I've learned from being in the Caribbean and Central America, there is NO long term thinking. They'd rather make 1 million dollars in one year than $800,000 per year over a three year period. I'm telling you, it's utterly prevalent in Antigua and many of the nations in the Caribbean and Central America. If you tell a guy down here, "I'll give you $20 to stand in place for 5 minutes, or I'll pay you $50 to walk 200 yards down the street and 200 yards back to pick up your money"...I guarantee that the majority would take the $20 and spare themselves the 400-yard walk, or risk that chance that you might die in the time it takes them to walk that far.

If anyone in the Antiguan government is smart enough to monitor these boards, and they should if they don't, please realize that you guys are costing yourselves MUCHO DINERO over the long haul. Not every sportsbook or casino located in your country is the next WWTS and has more money than god...people will leave...and not just suspect or under funded operations, but quality sportsbooks as well.

[JC]

I an in favor of the new tax. I think it is a fair percentage and good for the industry in the long term.

When I set up WSEX in 1996 I contacted many jurisdictions. I chose Antigua because I felt it was the most highly regulated one.

The fact remains that Antigua doesn't put up with dead beat/scam operations. I am not saying there has never been a dispute with a player that wasn'tsettled to his satisfaction but at least there has always been a place to air your grievances.

You never hear about Antiguan shops closing their doors and running with the post up money. It stems from the combination of quality books that choose to locate in a credible jurisdiction and pay a few extra dollars and the fact that the government doesn't tolerate fly by night operations.

When you meet someone who went to Harvard University and think he sure is a smart guy, it's not because Harvard made him smart. Harvard cranks out a lot of smart people, but mainly because they start with smarter people to begin with.

When you start with no regulations you are going to end up with problems like CR does year after year after year. And who knows which "solid" book will be next to fall. There are rumors going around about books many thought were too big to fail.

When we applied for our license in Antigua they required us to turn in complete background information on any shreholder who held 5% or more of the company. And we couldn't hide behind a holding company which we set up for other reasons. They said we need to know who owns the holding company in that case.

[Cobra]

It seems suicidal to me. I would think enough people will leave to more than offset any tax revenues. Plus, the even bigger ramification is the lost potential revenue. If I am starting a new sportsbook or casino, I am not locating in Antigua. There is absolutely no shortage of countries hungry for large influxes of U.S. Dollars.

I have never been burned by any offshore and I don't see the "premium" of an Antigua address.

There are good operations in Costa Rica and elsewhere. Its just important to look at each place on an individual basis and ask around for others experiences. Its not hard to find out who the good books are.

[Cobra]

And another thing....

If I were starting a new operation, here is what I would do....

1) Locate somewhere other than Antigua.
2) Save millions (eventually) in bull*^%$ taxes.
3) PAY my players
4) Eventually, my book would be respected with a long history of paying everyone and no one would care where I was located.

The Antigua government seems to be saying "This tax is for all the good services we provide in insuring fair games and reputable operators". As a player, this sounds great. If I were an operator, I would have no use for this goverment picking my pocket.
Just pay the players, pay the players.

[blackchip]

I agree with Cobra 100%. JC I respect most of your input but Antigua is changing rules every year. Last year Black Box this year tax. What are they going to do next to punish the companies that hire their normally unemployed citizens?

[cecil]

Face the facts. as much as the books complain, there are more and more of them everyday. Its obviously profitable. If this move will help regulate the good and the bad books, I am all for it. 3% is not much.

[JC]

It is not the tax that makes the license good for the players, it is the regulation of the operations. The tax is between the books and the government. The press release we are all reading was put out by the Antiguan Offshore Gaming Association which was invited to give it's input regarding the new regs.

But, there is no doubt in my mind that companies with poor financials, and questionable backgrounds shy away from Antigua. This doesn't mean there aren't reputable places elsewhere. It doesn't mean that a bad egg can't slip through in Antigua. However, it is less likely.

Some people won't play offshore at all, some will only play at licensed operations, others will play anywhere. Everyone has their own respective comfort threshold.

I will also add that every book I've observed sees value in being licensed. Not because they all have them but they all SAY they have them in their ads or on their websites whether they do or not.

I am happy that the company I founded operates in a country that takes regulation seriously and wants to be more than a license store. It is better for Antigua to have 10 books averaging 10 million a year each, giving the government 3 million a year in taxes than 40 books paying $75,000 a year each.

As far as the black box goes, that was never passed. It was only being discussed. I thought it was a terrible idea and in the end so did the government. Those were internal discussions and the information was never leaked nobody would have known the idea ever came up.

FiI was very ignorant of how this business worked when I first started. The most shocking revelation to me was how many companies feel comfortable operating off of the customer float. Not just because they got in trouble, the scariest thing is how many places feel comfortable planning their business on that model. But what do I know?