PoC tax threatens profits

Australian operators are concerned that a point of consumption tax introduced in South Australia may go national, which they say could potentially render the wagering industry unprofitable.

The tax came into effect in South Australia on July 1. All betting operators taking bets from anyone in South Australia will have to pay 15 percent of net state wagering revenue in excess of A$150,000 ($119,196), even if they are not physically based there. The measure includes sports betting, horse racing, harness racing and other wagers such as the outcome of a general election or the Academy Awards.

Although South Australia has been the first to impose the tax, it may not be the last. According to Sydney-based law firm Addisons, Victoria, New South Wales and Western Australia have expressed their support for South Australia’s POC Tax. It says each of these governments is now expressly contemplating the implementation of a similar measure.

Operators have criticized the new tax, saying it unfairly punishes customers in South Australia. According to Addisons, some are ceasing business in the state, while others are reducing services. CrownBet and SportsBet for example are cutting back on their promotion of South Australia horse racing to decrease the amount of revenue generated there.

“If this POC tax were to go national, every single betting agency is in a loss-making position,” said Ladbrokes Australia CEO Jason Scott. “As an industry we now need to find a way to pass [the cost of tax] onto the consumer.”

Ainsworth sees H2 turnaround

Ainsworth Game Technology reported profit after tax of A$37.9 million ($30.4 million) for the year ended June 30, 2017, ahead of guidance, as a result of a strong second half. CEO Danny Gladstone said the FY17 results were ahead of the company’s initial guidance, with the second half of FY17 recording profit before tax of A$42.2 million, an increase of 178 percent compared to first half of the year. “Our impressive second half performance begins to reflect the competitiveness of our broader product offering, our investments in technology, sales and marketing, and the strength of our international footprint,” said the chief executive.

Doubts over IRs after China policy shift

There is a question mark over major planned investments in IRs in Queensland as a result of China’s decision to restrict overseas investments in some industries, including gaming. According to the Gold Coast Bulletin, a key funding partner of ASF Group - state-owned China State Construction Engineering Company, is just one of the potential investors in the Gold Coast which may be affected. Knight Frank agent Mark Witheriff said he was aware of at least two major deals, totalling around A$40 million, which have fallen after Chinese interests withdrew. “I suspect there will be a slowdown until people see the lie of the land in terms of property,” he said.

“There are a couple of methods we can do that: one is a differential pricing, less competitive pricing, or less enticing promotions.

Another way is a push for offshore staff... meaning fewer jobs for Australians.” Scott told a panel at GRWA in Sydney that Ladbrokes is in the process of building a differential pricing system, which will make bets more expensive for South Australia customers.

He also added that the group is preparing for a national POC tax, which he expects will be in place by July of next year.

“As an industry, politically, we don’t have many friends, we’re an easy target. To me, it’s a money grab,” he said. “The perception is that bookmakers make a lot of money.”

Total gambling expenditure in Australia for the 2014/2015 year, the latest data available, was A$22.7 billion, up 7.7 percent. For South Australia, total expenditure was A$1.02 billion, with the bulk of that figure bet on pokies. That puts it in sixth position out of the country’s eight jurisdictions, with New South Wales and Victoria in the lead with A$8.91 billion and A$5.75 billion respectively.

Ladbrokes launched a digital operation in Australia in 2013 and posted net revenue for the year to April up 59 percent. Paddy Power Betfair’s Australian unit SportsBet reported net revenue of GBP312 million last year, with profit of GBP84 million, up 38 percent.

SportsBet lobbied hard against the POC tax in South Australia, emailing clients to contact their local politicians to protest.

It argues the new tax will make “wagering in South Australia more expensive than anywhere in the world” and means shorter odds on betting markets.

The South Australian government has defended the tax, saying it is an initiative to tax money where it is actually earned.

Dini Soulio, Liquor and Gambling Commissioner, Consumer and Business Services at the Attorney General’s Department, South Australia - told the panel that the tax was to create a level playing field for those operating in South Australia. He argued that taxes paid by citizens in South Australia need to be allocated to programs to alleviate the harm from problem gambling.

“This is a government initiative to tax in relation to where money is earned,” he said.

“What the government saw was that a number of operators who were making money from people in South Australia through betting operations, and the government was dealing with harms that arose from that industry.”

The tax is part of a broader issue that has been simmering over taxation of online gambling companies, which have been accused of regulatory arbitrage.

Many of the country’s online betting operations are based in the Northern Territory, where they benefit from a lower tax regime and market their services elsewhere in the country. As of May this year, there were 21 internet bookies registered in the NT, including William Hill, CrownBet, bet365 and Ladbrokes.