The former president of Puerto Rico’s House of Representatives, José Aponte Hernández has warned that the government intends to replace lost revenues which would result from eliminating an inventory tax, with the legalisation of online gambling, and increasing the number of slot machines at El Camarero Racetrack.
Aponte Hernández who serves as the current chair of the Puerto Rico House of Representatives’ Federal, International and Status Affairs Committee, said that online gambling would put Puerto Ricans at risk.
“I have said that gambling is harmful to the mental health of our people, produces addiction and other medical problems that cost the state millions of dollars annually. You have to weigh that cost, the pain of the Puerto Rican family against the possibility of earning millions here or there. In that equation, it must be the family that comes first,” he said.
In addition, an increase in the gambling offer on the island does not necessarily mean that the treasury would benefit, he argued saying that the government should focus on improving the land based casino sector and eliminating illegal gambling machines instead.
“It recently transpired in a public hearing to expand internet gambling that this would only leave the government about US$8m of additional revenues in the first year, with a stunted increase of two percent per year, vis-à-vis the additional government expenditures for health and public safety issues, which will exceed any projected profits. However, it also transpired that the elimination of illegal machines on the street would result in an additional income for the Treasury of about US$180 million per year,” he said.
The casino industry in Puerto Rico has been in crisis for a number of years due to the negative economic situation and a lack of government oversight when it comes to illegal gaming. While slot machines outside casinos are banned under Puerto Rico’s gaming act they have spread widely and at a fast pace and are now commonplace in bars, shops and in other small businesses. Some estimates put the number of illegal slot machines as high as 40,000 with the illegal sector worth an estimated US$1.5bn. In addition illegal slot parlours are also commonplace and can in some instances be large scale.
However, Aponte Hernández referred to official data from The Puerto Rico Tourism Company (PRTC), which reported an increase in revenues from casinos of 13.45 per cent compared to 2016. This is despite the fact that Puerto Rico was hit by two hurricanes, Irma and María, last year.
“At the beginning of June, the Director of the Gaming Office of the Tourism Company said in a public hearing that about US$263m was raised in 2017 by gaming, that’s about US$35m more than in 2016.” Aponte Hernández argued that the increase was due to the fact that the majority of illegal slots were not operational and that the increase came directly from casinos. “That is why every game or increase must be concentrated on the casinos, which create direct and indirect jobs and allow new local businesses to be established as a result of the economic activity they produce,” he said.
The inventory tax means that merchants must pay taxes on products they have stored, even though they do not sell them. In March, the Government Committee of Puerto Rico’s House of Representatives, in conjunction with its Treasury Committee, began analysing a bill that would eliminate the tax on inventory as the tax has had a negative effect on stored inventory and product reserve.
Although Puerto Rico presently has, a certain amount of local autonomy according to the U.S. Constitution ultimate governance of the island is retained by both the U.S. Congress and President. However, momentum is growing to permit online gaming in the light of the recent Supreme Court decision on sports betting.
In May, Senator José Nadal Powers presented Senate Resolution to look into the viability and desirability of allowing sports betting in Puerto Rico. In a written statement he said, “The recent decision of the Supreme Court of the United States on the unconstitutionality of the prohibition on sports betting opens up the way to a new industry that puts Puerto Rico in a position to compete with other betting destinations worldwide.”