THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not Reportable
Case no: 1330/2021

In the matter between:
THE WESTERN CAPE GAMBLING
AND RACING BOARD
FIRST APPELLANT

THE PROVINCIAL MINISTER OF
FINANCE, WESTERN CAPE
SECOND APPELLANT
and
SUNWEST INTERNATIONAL (PTY) LTD
t/a GRANDWEST CASINO &
ENTERTAINMENT WORLD

FIRST RESPONDENT

WORCESTER CASINO (PTY)LTD
t/a GOLDEN VALLEY CASINO
& LODGE

SECOND RESPONDENT

EASTERN CAPE GAMBLING BOARD
AMICUS CURIAE

Neutral citation: The Western Cape Gambling and Racing Board and
Another v Sunwest International t/a Grandwest Casino &
Entertainment World and Another (Eastern Cape
Gambling Board as Amicus Curiae) (Case no 1330/2021)
[2023] ZASCA 118 (04 September 2023)
Coram:
DAMBUZA ADP, MOCUMIE and PLASKET JJA and
GOOSEN and MALI AJJA
Heard:
22 November 2022
Delivered: 4 September 2023
Summary: Tax Law – Gambling – gambling tax – s 64 of the Western Cape
Gambling Tax Act 4 of 1996 and Schedules thereto – whether freeplay credits
awarded by casino operator licence holders to its customers attract gambling
tax under s 64 read with the Schedules of the Act – under s 64 of the Act
gambling tax is assessed on gambling activity of customers – freeplay credits
form part of the ‘drop’ which is a component of ‘adjusted gross revenue’ on
which taxable revenue is determined – gambling tax is payable in respect of
freeplay credits.

ORDER

On appeal from: The Full Court of the Western Cape Division of the High
Court, Cape Town (Erasmus, Mabindla-Boqwana and Papier JJ sitting as
court of first instance):
The application to introduce further evidence on appeal is dismissed.
The amicus curiae is ordered to pay the respondents’ costs for the
application for introduction of further evidence, such costs to
include the costs of two counsel where so employed.
The appeal is upheld.
The order of the Full Court is set aside and replaced with the
following order:
‘The application is dismissed.’

JUDGMENT
Dambuza ADP (Mocumie and Plasket JJA and Goosen and Mali AJJA)
Introduction
[1] The issue for determination in this appeal is whether ‘freeplay
credits’ (freeplay) used to bet in slot machines at the first and second
respondents’ casinos attract gambling taxes and levies payable to the first
appellant, the Western Cape Gambling and Racing Board (the WC Board).
The Full Court of the Western Cape Division of the High Court (the high

court) held that freeplay does not form part of taxable revenue under the
Western Cape Gambling and Racing Act 4 of 1996 (the Act). The WC Board
together with the second appellant, the Provincial Minister of Finance,
Western Cape (MEC) appeal against the judgment of the high court, leave
having been granted by that court.

[2] The Eastern Cape Gambling Board (the EC Board) was admitted as
amicus curiae in the high court proceedings. It had also been confronted with
similar issues relating to freeplay in the Eastern Cape High Court. In those
court proceedings the applicants were Emfuleni Resorts t/a Boardwalk Casino
and Entertainment World and Transkei Sun International t/a Wild Coast Sun,
which are subsidiaries of Sun International (South Africa) (EC casinos).
Having been admitted as amicus curiae in this appeal, apart from aligning
itself with the contentions made by the WC Board, the EC Board also brought
an application for the introduction of further evidence in the appeal.

The facts
[3] The first and second respondents, Sunwest International, trading as
Grandwest Casino & Entertainment World (Grandwest) and Worcester
Casino, trading as Golden Valley Casino and Lodge (Golden Valley) are also
subsidiaries of Sun International. They are holders of casino operator licences
granted in terms of s 27(a) of the Act. In the high court they obtained an order
declaring that freeplay credits does not constitute part of the ‘drop’ which is a
component in the formula used for computation of adjusted gross revenue
when determining taxable revenue under s 64, read with Schedule III of the
Act. That section regulates payment of gambling and betting taxes and levies

to the WC Board by holders of casino operator licenses in the Western Cape
Province. The respondents were granted consequential relief requiring the
MEC to set-off the amounts already paid by them against their future liability
for gambling tax.

[4] In gambling parlance, freeplay refers to special non-cashable credits
loaded by the respondents as casino operators onto card accounts that a group
of gamblers known as the ‘most valued customers’ use when playing at the
casino slot machines.1 These customers do not pay for freeplay. It is a gift or
reward given by the casinos to their most frequent customers.

[5] Freeplay is a cash equivalent denominated in rand value, and the
amount given to a customer is based on the extent of his or her past gambling
activities and conduct. The customer downloads the credits onto a slot
machine within a specified time, at a specified casino, and then places bets.
As the customer plays, the credits are deducted from his or her slot account.
The casino does not receive any revenue from a game played with freeplay.
But the winnings accrue to the player. Freeplay cannot be redeemed for cash.

[6] A dispute arose between the WC Board and the casinos as to whether
freeplay is part of the casinos’ taxable revenue for purposes of assessing
gambling tax payable by casino licence holders. The context is this: under s
64(1) of the Act casino licence holders are liable for gambling and betting
taxes and levies which are computed as provided in Schedule III and IV of the

1 In March 2017 freeplay was renamed Xtra Play. However, for convenience, the term will still be used in
this judgment.

Act. In terms of s 64(5) of the Act, the provisions of Schedules III and IV,
which include the assessment of gambling tax payable by licence holders, are
administered by the Chief Executive Officer on behalf of the WC Board.

[7] The dispute arose after the Sun International management arm, Sun
International Management Limited (SIML) introduced a software system
known as BALLY to its subsidiaries nationally. BALLY is able to distinguish
between freeplay and credits paid for in cash by a player. This allowed for
SIML to exclude the value of freeplay when calculating gambling taxes in
provinces where Sun International operates casinos. SIML sought approval
from the WC Board for the exclusion of non-cashable bets funded by the
casinos.

[8] The exchange between the parties culminated in a letter dated 9 March
2017 wherein the WC Board expressed the view that freeplay is part of the
casinos’ ‘adjusted gross revenue’ and is therefore part of their taxable revenue.
The casinos considered this view to be a decision of the Board on the issue
and launched an appeal against it as provided in s 13(4) of the Act.2 The Board
protested that it had merely conveyed its view on the dispute rather than
making a decision or determination on the treatment of freeplay. The parties
then agreed to approach the high court for a declaratory order on the
interpretation of the relevant taxation provisions of the Act.

2 Section 13(4) provides: ‘Any person aggrieved by a decision taken in terms of a delegated power or function
shall have a right of appeal to the Board against such decision in the manner and within the time prescribed.’

[9] In the high court the casinos contended that on a proper interpretation
of s 64, freeplay is excluded from the definition of the ‘drop’ for purposes of
computation of gambling tax. They contended that the purpose for imposition
of gambling tax is to raise public funds from revenue received by licence
holders in proportion to the financial benefit enjoyed by them. They posited
that the tax is levied on the premise that the licence holder has acquired
revenue from gambling, and is therefore ‘better off’ financially. However,
they do not derive any revenue or quid pro quo from a game played with free
play. Instead, whilst their financial position remains the same if a customer
loses a freeplay game, a win on a freeplay game results in financial loss to the
casino. Consequently, including freeplay in the taxable revenue constituted
arbitrary deprivation of property in breach of s 25 (1) of the Constitution of
the Republic of South Africa (the Constitution), because it requires a licence
holder to pay an increased gambling tax in circumstances where its financial
position has not improved. Constitutional imperatives therefore militate
against taxation of freeplay, so it was argued.

[10] The argument went further: freeplay results in increased gross gaming
revenue (GGR) over time because it attracts more players to casinos, and once
freeplay credits are used up the players use their own resources to continue
playing. Consequently, the use of freeplay results in increased gambling tax
liability for gambling licence holders.

[11] The WC Board’s argument centred on the text of s 64 read with the
Schedules, and the purpose of the section as stated in the Act. It highlighted
the existence of distinction in the language of s 64 and the definitions of the

terms contained therein, between credits that are paid for and those that are
free. It maintained that this is because the intention was to advance
administrative simplicity and to protect tax revenue. Furthermore, unlike with
assessment of income tax, where freeplay is deductible as an expense incurred
in the production of income, it is not deductible for gambling tax assessment.

[12] The high court agreed with the respondents’ interpretation of the Act.
In addition to declaring that freeplay does not form part of taxable revenue for
purposes of gambling tax computation, it ordered the WC Board to set off
against the respondents’ future liability to pay gambling tax, the amounts
agreed or proved by them to have been derived from freeplay in their past tax
assessments. The court was of the view that it was irrational to levy gambling
taxes on a ‘neutral position’, especially when it had been demonstrated that
over time freeplay results in growth in gambling revenue which, in turn,
results in increased gambling tax liability.

[13] In this appeal the parties maintain the same arguments they made before
the high court. The EC Board, as the amicus, asserted that there is no evidence
that the freeplay goals of customer loyalty and increased gambling activity
over time have ever been attained. It is in this regard, in part, that it seeks to
introduce the evidence of Professor Anthony Lucas (Prof Lucas), a professor
in casino management in Nevada, United States of America (US). In sum,
Prof Lucas asserts that freeplay does not increase gross gaming revenue
(GGR) in casinos. He refers to a number of academic writings from the US to
illustrate that imposition of gambling tax varies in different jurisdictions and
is a matter of legislative election rather than uniform application. In relation

to the constitutional protection of property rights, Prof Lucas states that the
inclusion of freeplay for the purposes of computing tax liability has not been
successfully challenged in the US. The argument is that given the similarities
in the US and South African contexts, the courts in this country should also
use the same approach as in that country.

Discussion
Text, context and purpose
[14] The principles applicable to interpretation of legal documents in this
country are trite. The language used in the legal text sought to be interpreted
remains central to the interpretative exercise; ‘for without the written text
there would be no interpretative exercise’.3 But the words in a document must
be considered sensibly, and due regard must be had to the context in which
they are used. In the relevant part s 64 reads as follows:
‘Imposition of taxes and levies on gambling and betting
64. (1) From time to time and in the manner prescribed, there shall be paid to the Board
gambling and betting taxes and levies by the holders of licences as provided for in
Schedules III and IV.
(2) Unless otherwise prescribed, the taxes and levies contemplated in subsection (1) shall
be –

(a) on the bases, at the rates or percentages or in the amounts, and

(b) payable in the manner and at the times
provided for in Schedules III and IV.’

[15] Item 1(a) in Part B of Schedule III, sets out the rate at which gambling
tax is to be computed. In relation to a casino operator licence, gambling tax is

3 The City of Tshwane Metropolitan Municipality v Blair Atholl Homeowners Association [2018] ZASCA
176 at para 63.

payable on taxable revenue. Under Item 1 in Part A of Schedule III taxable
revenue is defined as ‘adjusted gross revenue less admissible deductions as
determined under this Act’ (taxable revenue – adjusted gross revenue (AGR)
– admissible deductions). It is common cause in these proceedings that
freeplay is not an admissible deduction.

[16] AGR is defined in Item 1of Part A of Schedule III. Only subparagraphs
(d) and (e) of that definition are relevant in this instance. In terms thereof AGR
means:
‘(d) in relation to slot machines, other than those contemplated in subparagraph (e) and (f)
below operated by a licence holder in the Province, the drop, less fills to the machine and
winnings paid out; provided that the initial hopper load shall not constitute a fill and shall
not affect the calculation of gross adjusted income;
(e) in relation to slot machines operated by a licence holder in the Province which are linked
via a wide-area progressive system, the drop, less fills to the machine, less any
contributions made by the licence holder which are payable in consequence of such wide-
area progressive system in respect of such slot machines during the tax period, and less any
winnings paid out which are not recoverable from the central fund in terms of the wide-
area progressive system; provided that the initial hopper load shall not constitute a fill and
shall not affect the calculation of adjusted gross revenue; provided further that where any
surplus amount is distributed from the central fund to a licence holder or where any licence
holder withdraws from a wide-area progressive system and in consequence of such
distribution or withdrawal recovers or recoups during any tax period any contribution
previously deducted under this subparagraph, such contribution so recovered or recouped
shall be included in the licence holder’s adjusted gross revenue in the tax period in which
the contribution is recovered or recouped’.(emphasis supplied)

[17] The ‘drop’, in the context of gaming on slot machines, is defined in Part
A of Schedule III as: ‘the amount deducted from players’ slot accounts as a

result of slot machine play’.4 The ‘fills to the machines’ represents the
winnings of players which require that the machines be refilled. In sum
therefore, the AGR is the amount deducted from players’ slot accounts as a
result of slot machine play, less the fills to the machines together with
winnings paid out. Significantly, the starting point in the determination of
taxable revenue is the drop. Contrary to the respondents’ contention, there is
no distinction, in the language used in the definition of the ‘drop’, between
own resource credits and freeplay credits deducted from a player’s account.
The ‘drop’ is ‘the amount deducted from players’ slot account as a result of
slot machine play’. There is no ambiguity in the language used in the text.

[18] In addition, this interpretation of the definition of the ‘drop’ is
consistent with the definition of the drop in relation to cashless slot machines
as: ‘the total amount of money and tokens removed from the drop box’. It is
similarly consistent with the definition of the drop in relation to table games,
which is: ‘the total amount of money, chips and tokens contained in the drop
boxes’.

[19] The interpretation of the ‘drop’ advanced by the WC Board is not only
grounded in the language used in s 64(1) and the definitions in Schedule III
and IV, it also accounts for the purpose of s 64 as conveyed in the heading

4 In the relevant part Item 1 of Part A of Schedule III reads as follows:
‘“drop” means—
… (b) in relation to slot machines, the total amount of money and tokens removed from the drop box, or for
cash-less slot machines, the amount deducted from players’ slot accounts as a result of slot machine play’.

thereto: the imposition of tax on gambling and betting activities.5 What is
sought to be taxed is the gambling and betting activity. Gambling activity is
defined in s 1(2) of the Act as follows:
‘(2) An activity is a gambling activity if it involves—
(a) placing or accepting a bet or wager in terms of subsection (3);
(b) placing or accepting a totalisator bet, in terms of subsection (4); or
(c) making available for play, or playing bingo or another gambling game as contemplated
in subsection (5)’

[20] Subsection1(5) provides that:
‘An activity is a gambling game if—
(a) it meets the following criteria:
(i) it is played upon payment of any consideration, with the chance that the person
playing the game might become entitled to, or receive a pay-out; and
(ii) the result might be determined by the skill of the player, the element of chance,
or both; or
(b) it is a bet or wager in terms of subsection (3), that is placed in a casino in relation to an
activity that meets the criteria in paragraph (a).
Simply put, gambling tax is payable on a gambling game played upon
payment of any consideration. Such consideration may be ‘money, merchandise,
token . . .  or any other thing, undertaking promise, agreement or assurance, regardless of
its apparent or intrinsic value . . .’6
Clearly, the fact that a licence holder makes no gain or derives no benefit from
a game of play is irrelevant in the assessment of liability for gambling tax. 7

5 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13;2012 (4) SA 593 (SCA)
para 18.
6 See definition of ‘consideration’ in s 1(1) of the Act.
7 The definition of ‘consideration’ in s 1(1) of the Act is the following:
‘Consideration’ means:

[21] The respondents’ approach in interpreting s 64 inverts the established
interpretative process by first devising a purpose for s 64, and then imposing
the devised purpose on the wording of the section. Their starting point is that
gambling tax is aimed at raising public funds in proportion to the financial
benefit derived by the licence holder. Apart from the fact that this approach is
incorrect, the devised purpose finds no support in the language of s 64.

[22] The high-watermark of the respondents’ argument with regard to the
language used in s 64 is that the word ‘amount’ in ‘the amount deducted from
payers’ slot accounts…’the definition of the ‘drop’ refers to ‘revenue’, in
keeping with ‘taxable revenue’. To support this interpretation they introduce
the dictionary meaning of revenue to reach the conclusion that ‘amount’ must
mean ‘amount of money’, and therefore the customer’s own funds (as opposed
to freeplay). However, as shown above, ‘taxable revenue’ is specifically
defined in the Act. And the use of the defined term ‘consideration’, for in
relation to gambling activity rather than money, is deliberate. On the
respondents’ interpretation, the word ‘revenue’ would have to be read into the
definition of the ‘drop.’ That would be improper when s 64 is capable of clear
and sensible interpretation.

(a) money, merchandise, property, a cheque, a token, a ticket, electronic credit, debit or an electronic
chip, or similar object; or
(b) any other thing, undertaking, promise, agreement or assurance, regardless of its apparent or intrinsic
value, or whether it is transferred directly or indirectly’.

[23] Generally the word ‘amount’ indicates a quantity of something.8 It
derives its full meaning from other words with which it is used, and its wider
context.  In this case the word is used as ‘amount deducted from players’ stock
accounts as a result of slot machine play’.9 Its meaning in this context is clear.
Where the amount deducted from a player’s slot account consists of different
forms of considerations there is no basis for confining ‘the drop' to only a
portion of the deduction.

Constitutional considerations
[24] The imposition of gambling and betting tax is a deliberate policy
adopted by the Western Cape Provincial Government. The policy entails the
charging of tax on holders of gambling licences for the act of conducting
gambling businesses. Nothing is irrational about such policy. And the
argument that the imposition of the tax in the absence of revenue or benefit
amounts to unlawful deprivation of property is misguided.

Application to introduce new evidence
[25] The answer to the issue whether the respondents should pay gambling
tax on freeplay lies in the interpretation of s 64 of the Act. Prof Lucas’
evidence is not only unnecessary for the interpretative exercise, it is also
irrelevant. The amicus curiae must pay the respondents’ costs for the
application to introduce new evidence.

8 See Oxford Concise English Dictionary. See also Merrian Webster Dictionary: the total number or quantity;
the quantity at hand or under consideration.
9 See also footnote 4.

[26] As to the costs of the appeal, the approach to the courts was, in effect,
a joint venture by the parties to achieve clarity on an issue of importance to
all of them. As a result, there should be no order as to costs.

[27] Consequently the following order shall issue:
The application to introduce further evidence is dismissed.
The amicus curiae is ordered to pay the respondents’ costs of the
application for introduction of further evidence, such costs to
include costs of two counsel where so employed.
The appeal is upheld.
The order of the Full Court is set aside and replaced with the
following order:
‘The application is dismissed’.

_________________________
N DAMBUZA
JUDGE OF APPEAL

Appearances:

Counsel for the first appellant:

J A Newdigate SC
Instructed by:

Marais Muller Hendricks Inc,

Cape Town

Phatshoane Henney,

Bloemfontein

Counsel for the second appellant:

R T Williams SC and H Cassim
Instructed by:

State Attorney, Cape Town

State Attorney, Bloemfontein

Counsel for the amicus curiae:

J de Waal and N de Jager
Instructed by:

Tshangane Le Roux Inc,

Gqeberha

Honey Attorneys,

Bloemfontein

Counsel for respondents:

A Cockrell SC and N Ferreira
Instructed by:

Cliffe Dekker Hofmeyer Inc,

Sandton

Webbers Attorneys

Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF
APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:

04 September 2023
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does not
form part of the judgments of the Supreme Court of Appeal

The Western Cape Gambling Board & Another v Sunwest International & Another (case no 1330/2021)
[2023] ZASCA 118 (04 September 2023)

Today the Supreme Court of Appeal (SCA) upheld an appeal by the Western Cape Gambling Board
against a judgment of the Western Cape High Court regarding the assessment of gambling tax payable
by casino licence holders. The Board, together with Sun International Subsidiaries Grand west and
Golden Valley casinos approached the Western Cape High Court for resolution of a dispute between
them as to whether freeplay should be excluded from the assessment of taxable revenue on which the
casinos had to pay gambling tax.
Freeplay refers to special non-cashable credits loaded by the respondents as casino operators onto
card accounts that a group of gamblers known as the ‘most valued customers’ use when playing at their
casino slot machines. These customers do not pay for freeplay. It is a gift or reward given by the casinos
to their most frequent customers. It cannot be redeemed for cash.
In terms of Section 64 (1) of the Western Cape Gambling and Racing Act 4 of 1996 gambling tax is
payable on taxable revenue, which is defined in the Act as the adjusted gross revenue (AGR) less
admissible deductions. AGR is defined as the ‘drop’ less fills in the slot machine and winnings paid out.
The ‘drop’ is defined as ‘the amount deducted from players’ slot accounts as a result of slot machine
play’.
In both the high court and the SCA at the heart of the interpretative exercise was the meaning to be
given to the language used to define the ‘drop’. The casinos’ interpreted the words used to exclude
freeplay, essentially because the word ‘amount’ in the expression ‘amount deducted from players’ slot
account . . .’ means ‘amount of money’ deducted from the players’ slot account. That, according to the
casinos, refers to the players’ own funds, and excludes freeplay. They argued, in addition, that because
they neither gain revenue nor derive any kind of benefit from freeplay gambling, it could have never
been the intention to cause them to pay gambling tax thereon. Payment of gambling tax in respect of
freeplay gambling constitutes arbitrary deprivation of property because when players win the casinos
are left poorer from paying out the winnings.

The Board argued that there is no distinction in the Act between gambling with freeplay and with players’
own resources. It maintained that the word ‘amount’ referred to all the deductions made from the
players’ slot account as players gamble on the slot machines.
The high court agreed with the casinos’ interpretation of the relevant provisions of the Act and held that
no gambling tax was payable on freeplay. However, in reversing the high court decision found that the
casino’s interpretation was based on an approach which was inconsistent with the accepted principles
of interpretation of legal documents. It found that on the casinos’ interpretation a word - revenue (or
money) – would have to be impermissibly read into the definition of the ‘drop’, even though the section
was not ambiguous. In addition, the argument relating to unconstitutionality of the Board’s interpretation
found no support in the Act. The court found the Board’s interpretation consistent with the language
used in the Act and in support of inclusion of freeplay in taxable revenue on which gambling tax is
payable.
~~~~ends~~~~