The Casino Association of SA (Casa), supported by Sun International and Peermont, is challenging the North West government’s decision to increase gambling levies paid by licensed casino operators, in a case that is set to test MECs’ powers in determining gambling levies.
The three parties have approached the Constitutional Court to confirm a high court ruling that the provincial MEC for economic development, environment, conservation & tourism overreached and is not legally empowered to determine levies.
An affidavit deposed by Casa, Sun International and Peermont argues that the executive branch of government should not itself be entitled to raise revenue for its operation, but should be dependent on the taxing power of a democratically accountable parliament.
The challenge follows the 2020 promulgation of an amendment to Regulation 73(1) of the North West Gambling Regulations of 2002, which introduced substantial increases to provincial gambling levies.
The parties have now asked the apex court to rule that the amendment was unconstitutional as the MEC did not enjoy such powers.
They are also challenging the lawfulness and fairness of the process followed in promulgating the amendment. Arguments will be heard on Thursday.
Sun International, worth about R10bn on the JSE, Casa and Peermont drew first blood at the high court, which declared the empowering provisions relied on by the MEC for economic development to be unconstitutional and invalid, and set aside the amendment.
Pay the difference
The high court also ordered the MEC and her provincial treasury counterpart to pay Sun International and Peermont, together with interest the difference between the gaming levies that the companies have paid and will have paid in terms of the “impugned” amendment, from the date of the amendment to the date of the court’s judgment.
The companies will argue on Thursday that the high court was correct when it said the MEC overreached in determining gambling levies.
“Even if this court were to find that the North West Gambling Act does not unconstitutionally delegate taxing powers to the MEC, we submit that its provisions nevertheless constitute an impermissible and unconstitutional delegation,” the parties state in an affidavit.
“That is because it is unconstitutional, and contrary to the separation of powers, for a provincial legislature to assign the discretionary, plenary legislative power to make levy-raising regulations in such wide terms (ie in relation to ‘any matter pertaining to gambling levies or fees’), without any guidelines to shape the exercise of that discretionary power, and in circumstances where the casino applicants’ right to property is affected by the imposition of gambling levies.
“In short, gambling levies are not aimed at regulating conduct. They are not even aimed at funding the operations of the (North West gambling) board. They are aimed, more generally, at raising revenue for the provincial fiscus. They are thus taxes or levies.”
The parties will also argue that inflation can provide no basis to adjust the rates of the levies. “Moreover, the applicants have demonstrated — with expert evidence — that in the period 2009 to 2017 the levies collected by the board exceeded inflation, and increased by approximately 20% in real terms. Therefore, even if inflation could, in principle, justify an increase in levies (which we deny), it provides no such justification on the facts.”
North West is home to Sun International’s flagship property, Sun City, which was opened in 1979. The recently refurbished establishment features hundreds of slot machines and over 40 popular table games.
Late by 20 years
Peermont, on the other hand, owns the Rio Hotel Casino and Convention Resort in Klerksdorp. The ultramodern 274 slot machines offer play in a range of denominations. There are 12 table games including blackjack, roulette and poker tables.
Peermont also owns the Mmabatho Palms Hotel Casino and Convention Resort, located in Mahikeng, the provincial capital. It features 155 slots and nine gaming tables in smoking and non-smoking areas.
The province and its gambling board in their responding papers said the case is late by 20 years.
They stated that it had been clear since implementation of the regulations in 2002 that regulation 73 introduced the payment of levies and fees.
“Casa’s failure to appreciate the genesis of the payment of levies and fees and their failure to challenge the 2002 regulation is fatal to their case.”
They also argue that it is within the powers of the minister to intervene and set levies and rates.
“We submit that the broad discretionary powers of the MEC are appropriate in this context. Gambling levies are potentially a powerful tool to [provincial] ability to generate revenue,” the papers read.
“The power to increase the levies and fees payable by casinos falls within the powers conferred to the MEC by the North West Gambling Act. The words employed by the legislature clearly indicate the latter’s intention to empower the MEC to regulate on matters concerning gambling levies and fees.”
Casa, Peermont and Sun International will ask the apex court to be the final arbiter on the matter and not send it back to the high court.
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