South African ConCourt rules North West government unlawfully increased levies on casino operators
It’s been a nerve-wracking time for the North West government to underline their actions on gambling operators in the province. Without a clear reason, South African casinos such as Peermont and Sun International have been subject to an unlawful rise in tax. The case was taken to the Constitutional Court and ended up being ruled in favour of the casino operators. The court questioned the North West provincial government on the purpose of changing levies. With no valid reason in hand, the verdict left the government needing to pay millions back to the casinos that were affected by the unlawful increase.
Prior to this case, Sun International had a similar fallout in 2021 with the Western Cape Gambling and Racing Board. The subject revolved around the use of free-play games that were awarded as a gift to loyal members. They argued that since free-play games have value, they should be taxable. The Western Cape Gambling and Racing Board elaborated further by mentioning that it can also be used as a form of advertising. In the end, the court dismissed the case since all the facts mentioned held no huge importance or relevance.
The gambling industry has contributed a substantial amount to growing revenue in South Africa. In 2022, Sun International generated over R11.3 billion. This is a 44 per cent increase from 2021 and shows how consistently the business has been run. Casinos in South Africa follow regulations set out by the National Gambling Board, are licensed and run within stringent terms and conditions. While following all the rules, these businesses form an integral backbone of the province and the country as a whole.
South Africa is already known to have a delicate stance on gambling which prohibits any form of wager games that have not been properly authorized. With all these factors in place, casinos like Peermont were quite appalled by the tax hike imposed by the North West Provincial Government. Despite facing all these challenges, South African casinos (both offline and online) still managed to come out on top once the verdict was placed. The case had no grounds to stand on and the ruling was made in favor of the gambling industry.
Background of Court Case
The Casino Association of South Africa (CASA) is a non-profit organization that serves and represents the casino industry in the country. They have been established to promote the interests of affiliated casinos as well as contribute to the growth of each sector. CASA plays a vital role in supporting collaborations among stakeholders while also upholding responsible gambling policies. When the association caught wind of the unfair casino levy case, they were determined to give Peermont and Sun International the best assistance in the matter.
Kenetswe Norah Mosenogi is the current MEC of Economic Development, Environment and Tourism for the North West. As a South African politician and member of the African National Congress, Mosenogi has managed an impressive amount of governmental sectors during her career. Her latest position was assigned in November 2022, the same year the order for increased casino levies was executed.
Casa challenged the legality of gambling levy hikes in 2023, arguing that Mosenogi had no right to impose a tax on the industry. CASA stressed that the power to raise taxes belongs to the legislature, and not the executive. This means that the decision should have been made and finalized by a collective body, not just one person. CASA elaborated further by breaking down the costs and losses incurred through the new law.
Tati Makgoka is a brilliant practitioner of law who started his career in 1992. He is well known for his publications and responsibilities which included being a Practicing Attorney, Judge of Appeal amongst many other positions. Makgoka judged the case, stating that “the levies imposed are revenue-generating charges whose purpose is to raise funds for the province”. He said: “but this has nothing to do with the North West Gambling Act or regulating gambling”. This was one of the many reasons he declared the tax hike invalid.
South African casino operators can claim back the unlawful levy
South African casino operators can put a close on this unlawful experience thanks to the efforts brought by CASA. Over two years, Sun International and Peermont protested against the mandatory payment hike. The taxes imposed were carried out with the condition that if they were not paid, harsh consequences would arise. These penalties come in the form of substantial fees which also count the outstanding days that payment has not been fulfilled. South African casinos that face these harsh ramifications are also at a high risk of having their licenses suspended.
The North West province is an entertainment hub for many brick-and-mortar casino establishments. You’ll come across more than 15 locations that feature gambling facilities, hotel services, easy parking, great food and many other amenities. This is besides the Top-rated South African online casinos that operate within the province. This action would affect more businesses than just casino operators, ultimately affecting the revenue stream of the country as a whole.
The court ruled that casino operators who paid this levy can now claim it back. Makgoka also agreed with CASA’s point that the responsibility of increasing taxes belongs to the legislature, not the executive. He said: “An MEC may not introduce a provincial tax by way of regulation, and a provincial act may not purport to empower an MEC to do so”. He added that all payments that have been made over the two years should be reimbursed in full. The court also ruled that the provincial government pay the legal costs for both the casino operators and CASA.
Sun International is a casino in South Africa that has been in operation for more than half a century. It’s no surprise that Peermont and Sun International buckled down and paid the unlawful levies that were imposed. This is because there was over 11 billion in revenue at stake and the possibility of layoffs as well as long-term effects. The aftermath would surely put a damper on future business prospects and overall progress. Casino operators had to do whatever they could to stay afloat and keep the business running.
With this unanimous verdict and given that the origins are gambling establishments, the total expected amount to be reimbursed should be quite substantial. Credit goes to Business Live as the media source of information provided in this article.