TAX ON GAMBLING WINNINGS WILL LEAD TO LOWER TAX INCOME, JOB LOSSES - CASA

Johannesburg, 3 March 2010: - The Casino Association of South Africa (CASA) has expressed its dismay at the proposed 15% withholding tax on gambling winnings of R25 000 and more which was announced in Finance Minister Pravin Gordhan's budget speech on 23 February, saying the proposed tax will have a negative impact on the industry.

"Notwithstanding the fact that the casino industry is already heavily taxed, contributing R4 billion in taxes during 2010, the fact that the announcement was made without any form of consultation with the gambling industry is extremely frustrating," says Derek Auret. "Moreover, other than an indication of the date on which the envisaged tax regime will commence, we have received no detail of how the proposed tax will be collected, what periods are to apply for its calculation, or whether losses should be off-set against winnings and numerous other detailed matters that are of importance to the industry."

According to Auret, CASA wrote a letter to Minister Gordhan following the announcement in his 2010 budget speech that some form of tax was being considered for gambling winnings.
"We expressed our concern at this possibility and requested an opportunity to engage with the Minister, but unfortunately no response to this request was received," Auret said. "The announcement in the budget speech on 23 February 2011 is the first that the industry has heard in this regard since the initial announcement some 12 months ago.

"Since this matter represents a serious challenge to the operations of what has up to now been a stable and, certainly for the government, lucrative revenue generator, we have sent another letter to the minister, expressing our belief that it is of the utmost importance that we get the opportunity to meet with him in order to find a mutually beneficial way forward," Auret said.

CASA's membership includes Tsogo Sun, Sun International, Peermont and London Clubs International, who together operate 35 of South Africa's 37 casinos. The combined investment of these companies in the country is in excess of some R17 billion, and together they employ upwards of 50 000 people. In addition, these casinos generated a revenue in excess of R13.5 billion out of a total of R16.2 billion for all forms of gambling during 2010.

"This turnover already represents significant tax generation, especially for the provinces where casino taxes and levies in most cases represent the largest percentage of own-revenue," Auret said. "In fact, an analysis of the value added statement of the casino industry clearly indicates that the government is the largest beneficiary in this regard, and that for the 2010 financial year some 37.14% of income from the industry accrued to it. By all accounts these figures reflect a significant economic sector in South Africa.

"There is little doubt that the imposition of the proposed tax will have an overall negative impact on casino turnover and thus on the tax payable to provinces, as well as on the sustainability of the significant number of jobs that the industry currently maintains. While we await the Minister's response to our letter, we are preparing to participate in all proceedings where it is possible to do so. When this matter comes before Parliament we shall deal with the implications of this decision," Derek Auret said.