Two separate companies currently hold licenses for Virtual Pachinko and Internet Digits Lottery Game concessions in Palau and each license costs $45,000.00 per year, revealed Director Rhinehart Silas of the Division of Revenue and Taxation.

Despite constitutional prohibition of gambling, Palau law currently allows for internet gaming called Virtual Pachinko and Internet Digits Lottery.  The law was enacted in 2000 and was further amended in 2008, allowing for issuance of 2 Virtual Pachinko and 2 Internet Digits Lottery licenses.

The concept of Virtual Pachinko game is that it would only be playable via internet and only by persons outside of Palau.  The Internet Digits Lottery game would allow players to select numbers to match those generated by computers and technically players would be outside of Palau.

Palauan citizens are prohibited from online gaming and the law mandates game operators to block access of locals seeking to play Virtual Pachinko or Internet Digital Lottery.

The law is vague in terms of where the businesses should be located but according to Minister of Finance Elbuchel Sadang, the servers should be located in Palau in order for Palau to be able to ensure proper auditing for tax purposes.

So far, according to Director Silas, none of the companies that have obtained the licenses have started operations but technically they can work with the three internet providers in Palau to block both companies’ internet sites from being accessed from Palau.

Palau is currently receiving revenue from licenses of $180,000 a year.  “By law they need to pay annual licenses and start operation within 3 years-time or the licenses will be revoked,” stated Minister Sadang.  They also should pay 4% on income generated less winnings paid out but so far no taxes have been paid due to operations not started.

“The people holding these licenses have not started operations but there are others that may be already conducting some types of illegal gaming activities in Palau and a taskforce has been created to investigate the reports,” added Minister Sadang referring to an earlier public notice issued by Division of Revenue & Taxation.

The purpose of the law was to seek new and innovative economic development policies for Palau to build upon. Former President Kuniwo Nakamura in signing the initial law RPPL 5-45 stated, “by successfully pursuing this development path, the Republic could serve as an example of the right way for a developing island nation to take advantage of the benefits of the Internet and significantly enhance its international reputation and stature”. (L.N. Reklai)