New online betting taxes risk blowing out the cost of punting and eroding millions of dollars in crucial funding to the racing industry if they are set too high, Victorian horse-racing officials warn.
Multiple n states have now moved to introduce a 15 per cent “point-of-consumption” tax, meaning that for the first time the state where an online bet is placed will receive revenue on gambler losses.
So far, the tax has come into force in South , before it begins in Western in 2019 and in Queensland. Victoria and New South Wales are both expected to introduce similar taxes.
But concerns are swelling within the racing industry about the potentially damaging impact a tax could have on betting turnover if it is introduced at the 15 per cent rate in Victoria.
The companies to be hardest-hit by the tax are ‘s rapidly growing online corporate bookmakers, such as Sportsbet, CrownBet, Ladbrokes and William Hill, who are licensed in the lower-tax Northern Territory.
Racing Victoria chief financial officer Aaron Morrison said the state racing industry had become heavily reliant on funding from online wagering operators, including lucrative sponsorships and the “race-field fees” they pay for the use of racing information.
In Racing Victoria’s past financial year, funding from the corporate bookmakers accounted for nearly as much revenue as its joint-venture with TAB, Mr Morrison said.
“The risk we see is that if the corporate bookmakers are all of a sudden faced with an increase in their cost base because of the introduction of a new tax, what are they going to do, how are they going to respond?” he said.
“Anything that’s going to negatively impact on wagering turnover … is going to present a real risk for us.”
Mr Morrison said very few corporate bookmakers were profitable enough to absorb a 15 per cent hit to their margins, and would likely be forced to wind back marketing and sponsorship investments with Racing Victoria and individual racing clubs, or pass on the cost to punters through “higher prices, worse odds”.
He said Racing Victoria’s funding was “100 per cent reliant” on wagering, and the risk of a price hike that encouraged punters to bet on sports with better returns was “probably the impact we are most concerned about”.
“If a punter says, ‘I’m going to bet less because it’s more expensive and I’m not getting the same return for the dollar I used to invest’, then they might bet on alternative products that are relatively less-expensive,” Mr Morrison said.
“We could see a decline in wagering on horse racing and a shift to other sports other sports, like NBA and EPL, for example, where there are no product fees levied.”
Officials from Victoria’s horse racing, greyhound racing and harness racing bodies had been meeting the Andrews government, which was engaging and consulting with them on their concerns, Mr Morrison said.
“We don’t know exactly what the impacts of this are going to be, but these are the things we are nervous about,” he said.
“There will be direct and indirect impacts to our sustainable funding, and when we are engaging with the government, what we are trying to work out is a scenario where the government takes account of the risks to our funding sources.”
‘s online bookmakers have recently ramped up efforts to sway government leaders in Victoria to consider introducing the new tax at a lower rate than 15 per cent.
But supporters of the tax say it is crucial to “level the playing field”. TAB operator Tabcorp, which has to pay vastly higher taxes than the online-only bookmakers, said it would continue lobbying governments to adopt nationally consistent digital taxes.
Mr Morrison said the Victorian and NSW were considering alternative rates. He said Racing Victoria was not seeking a specific rate, but he believed a 15 per cent tax would be too onerous.
“Fifteen per cent doesn’t have any great science behind it and could lead to material adverse unintended consequences,” he said. “If the number settles at less than that, we’re likely to all get a better outcome.”
An earlier version of this article incorrectly stated the WA point-of-consumption tax was due to be introduced in January 2018. The WA tax takes effect in January 2019.