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Puerto Rico – Puerto Rico casinos to face new competition from slots outside casinos

By - 17 December 2018

The governor of Puerto Rico, Ricardo Rosselló, has signed new rules into place, which allows legalised slot machines outside of casinos.

The law was approved by the Legislative Assembly in November. The new law provides for the legalisation of 25,000 slots that have up until now operated illegally.

Fifty per cent of revenue generated by legalisation will be used for a police retirement fund. Forty five per cent will be earmarked in order to help municipalities through the Health Insurance Administration (a body which implements and administers island-wide health insurance system) while the remaining five percent will be used for expenses related to regulating the now legal industry.

The new rules on slot machines on the island are part of a much wider draft of new tax measures designed to provide nearly US$2bn in tax relief over the next five years. In April Governor Rosselló announced the introduction of his bill for proposed changes to the Puerto Rico Internal Revenue Code. The proposed reform, H.B. 1544, seeks to simplify the existing tax structure not only by effecting fiscal measures that promote economic growth but also by fostering an environment of voluntary compliance from all sectors.

Having signed the bill Rosselló said that it would have a huge impact on the economy which is still slowly recovering from the devastating effects of hurricanes Irma and Maria. “Despite the deficit we had at the beginning of our mandate, today we are making a reality of the new tax model that we achieved after making the necessary fiscal adjustments and which establishes an ideal scenario for investment, as well as a relief for all taxpayers and merchants.”

However, he Financial Oversight and Management Board for Puerto Rico wants more details as to how legalised slots will help boost government revenues. After the governor signed the bill, the board, which consists of seven members, requested more information on the slots that will be legalised and how they will affect government revenues. The administration has until the 19th of this month to provide the data.

In a statement, the board said: “The Supervisory Board has repeatedly expressed its concern that the video lottery provisions included in the legislation are not neutral for the Treasury, since the Government and the Legislature have not presented sufficient evidence that these changes will not cannibalise existing revenues of the Government’s fiscal plan.”

However Rosselló, said that the issue had already been resolved and there was nothing else in particular that needed to be discussed. According to the Senate President, Thomas Rivera Schatz legalising slot machines outside of casinos would generate about US$160 million in taxes per year. Rivera Schatz said that new regulations were needed and operators had been requesting changes to Puerto Rico’s gaming laws for some time. Speaking before the Senate in August Rivera Schatz argued that allowing these machines to generate cash prizes would not necessarily mean unfair competition for the casino industry, as they target a different customer base.

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