Ex-minister warns over gambling
By NEIL HARTNELL
Tribune Business Editor:
A former finance minister yesterday cautioned the Government about allowing Bahamians to gamble in foreign-owned casinos, warning that it could lead to increased foreign currency outflows and actually reduce net revenues collected as taxes by the Government.
While the Ingraham administration's plans to reform this nation's gaming regulations are currently not thought to include Bahamians being allowed to gamble in the casinos at Atlantis and Cable Beach, the ex-finance minister in the former PLP administration, James Smith, said the implications of any such decision needed to be considered carefully because they were likely to negatively impact the nation's foreign exchange reserves.
Mr Smith explained that under the current system, with only foreigners allowed to gamble in Bahamas-based casinos, the Government gained its revenues in foreign currency, while the foreign reserves benefited whenever the Central Bank purchased US dollar proceeds from gaming activity from the commercial banks during the course of its daily operations.
But if Bahamians were allowed to gamble in the foreign-owned casinos, their Bahamian dollars would need to be converted into foreign currency whenever their owners wanted to repatriate profits/revenues outside this nation.
Such conversion, Mr Smith said, would cause a drain on foreign currency reserves that might not be offset by gambling by the foreign patrons of Bahamian casinos, leading to a net outflow of foreign exchange. "The earnings from the casinos are always foreign exchange," Mr Smith told Tribune Business, "so we are not only assured of revenues to the Treasury, but revenues for the foreign reserves when the Central Bank buys from the banks."
If Bahamians were allowed to gamble in casinos, their gaming losses would need to be "offset against foreign currency earnings".
"Therefore, in assessing this, you have to marry it with these other concerns, and look at the foreign currency impact and whether it contributes to the growth of GDP, or the reverse," Mr Smith said.
"You have to buy foreign currency to go out, and who mitigates losses by the locals, which would otherwise be capital inflows. You could end up with a zero contribution, or a negative one."
Explaining that the Government could end up with less revenue than anticipated, as well as increased foreign currency outflows, if it made such a decision, Mr Smith described this as the "unexpected returns" and "unintended effects" if Bahamians were allowed to gamble in the foreign-owned casinos.
And with many US states altering their lotteries because they were not obtaining the returns anticipated, Mr Smith added: "Gambling does not create added value; it merely creates the transfer of wealth from one group to another."
With Bahamians seemingly having "a high propensity to gamble", Mr Smith also warned that legalising the sector and permitting casino gambling for locals could also result in a loss of import and customs duties.
"We might end up getting less revenue because consumption has gone down, and the gaming industry does not require imports, because its equipment is already here," he added."
April 14, 2010
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