Panama Lifts Tax on Gambling Winnings
Panama has moved to scrap a recently introduced, but ineffective gaming tax in a bid to welcome back high-spending tourists to the Central American country. This comes after a recent change in the country’s leadership; the tax was introduced by the previous government in 2015. There has been a reported fall in revenue by the government from the gaming industry.
The Junta de Control de Juegos (JCJ) gambling regulatory agency, a subdivision of the Ministry of Economy and Finance, recently announced they will scrap the 5.5% tax on gambling winnings. This tax has applied to any withdrawals or conversion of chips or tokens back into cash. The former government had intended the additional revenue to go towards retirement benefits for senior citizens.
The tax was unsuccessful, however, at least for the short time that it was in operation. In 2014, the year prior to the tax’s introduction, the government was able to claim 96.1 million USD in revenue from gaming (Panama’s currency is pegged to USD). This revenue fell in 2015 to 82.2 million USD and then again in 2017 to 79 million USD. This was then contrasted with a slight increase in 2018 to 86.7 million USD. Most recently, however, the revenue decreased significantly again for the first eight months of 2019. If the tax can’t actually generate more revenue for the government than senior citizens won’t benefit from its operation, and the whole plan is a bust.The new government is aware of this. Apart from just eliminating the tax, they will be introducing new measures to promote revenue. The JCJ said that it would hire more auditors to better handle tax collection, as well as introduce a new electronic auditing system.
“We will increase revenues and promote responsible gambling, this set of measures and others will help us to make this activity positively impact the country’s economy,” said JCJ secretary Manuel Sánchez.
When the bill for the tax was originally introduced, it immediately led to a push back from the gaming industry. This came to a head when the Association of Gambling Operators (CCIAP) asked the then-president, Juan Carlos Varela, to veto the measure. However, their call went unanswered and the bill materialized into law in 2015.
The lifting of this tax comes as welcome news to the Asociación de Administradores de Juegos de Azar (ASAJA), a gaming body in the region, which has been trying to find a way to scrap it since it was introduced. This body argues that the tax just promotes both tourists and local gamblers to head to neighboring Central American countries for business, which can offer them a better value for their buck.
At this moment, operators of Panama-licensed casinos pay 12% tax on table revenue and 18% on slots. Bingo operators pay 15%. Sports betting is conducted on a somewhat different system, paying a variable rate on turnover that spans from 0.25% to 1%, plus an additional 2% on winnings paid to gamble.
Iván Eskildsen, an administrator for the Autoridad de Turismo de Panama (ATP), has already offered their group’s support for the remission of the tax. Tourism growth has been reached its lowest point in a decade at only 3.7%. In addition, hotel occupancy has fallen below 45% in the past two years, which has led to a reported loss of approx. 40,000 jobs.
The Central American republic has increasingly relied more and more on tourism to bolster its economy. The most recent numbers say that tourism generates 1.4 billion USD per year. Not a small percentage for a country with a total GDP of 61.84 billion USD. In 2013, they hosted 1,527,228 tourists through the airport of Tocumen. Panama has the highest per capita tourist spending of any Central American country with average spending of 365-385 USD per day. It only makes sense that the government would want to ensure that this industry grows. Their most recent move shows that they see the gaming industry as an ally in this process.
A New Era
A lot has changed in Panama over the last year. With the 2019 election came a new government in office. The current president Laurentino “Nito” Cortizo Cohen, as a member of the Democratic Revolutionary Party, will likely bring the country considerably to the left. However, by lifting this gaming tax so early into his presidency, Cohen has signaled strong support for the gaming industry within his country. No doubt aware of the tourism and revenue that it can bring.