SA Point of consumption tax – my view

$117,000,000.00. That’s just Sportsbet’s profit for the last financial year. That is after paying all taxes, product fees, wages, so on. Where does that $117 million mostly end up? not in Australia’s economy, but back in the UK. Sportsbet is owned by the Paddy Power/Betfair company. We can add to that Bet365, Ladbrokes, William Hill, & Unibet as other corporate bookmakers that send all their profits offshore.

These bookmakers are making a killing from Australian punters and the government has done very little about it. They are now sucking hundreds of millions out of our economy each year. Is it too much to ask them to pay their fair share of tax? it seems so.

How much burden do gambling companies place on the economy?

First you have to understand that these companies profit isn’t the only thing that is costing Australia money. These corporate bookmakers only allow losing gamblers to bet with them and push the really big losers to bet even more. This causes major problems for each state which then has to spend your tax dollars dealing with problem gamblers. Problem gambling not only affects the individual, but also their families and the community they live in. Sportsbet made a profit of $117 million, but it cost the government 10’s of millions in social issues.

The corporate bookmakers are actually taxing the government AND making a massive profit. Now that a state government want’s to get some of that cost back, the bookies are up in arms about it.

There is a direct link between smoking and cancer. If you smoke, you’re more likely to get cancer, if you get cancer the government subsidies your treatment. Cigarette companies made a total profit of $1 billion last year, but research has shown that smoking causes a $31.5 billion dollar loss to the economy of which $318 million is directly paid for from the health system. So for every dollar that cigarette companies make, they are costing the Australian public $31.50.

Now, gambling is not the same as smoking. All smokers are at risk of cancer, but all gamblers are not at risk of gambling issues. But there is still a percentage that are. It’s also not a new thing to tax companies that make a profit from gambling. Since 1995, Star city has had to pay a 2% levy on their revenue to the “responsible Gambling Fund”. This works out to about $12million a year and the money is spent on counselling, research and other services to help people with gambling problems.

It’s a pretty simple idea and makes sense. If your product contributes to costs elsewhere, you should be responsible for those costs.

The South Australian Place of Consumption Tax

If you live in South Australia and have a betting account you would have recently received an email from your bookie trying to scare you into thinking that you will be bonus banned, receive worse odds and lose even more money. Let’s have a look at what the SA government are proposing.

The place of consumption tax is a 15% tax on net wagering revenue from all betting companies offering service in SA. Any bets placed in SA from January 2017 onward will fall under this tax.

The SA government expect to generate about $9.2 million in tax per year. That means bookmakers are currently making about $62 million from SA residents.

There is a tax free threshold of $150,000, which means smaller books making under $1 million profit from SA residents will not have to pay anything. The first $500,000 generated will go towards the Gamblers Rehabilitation Fund.

What the bookies say

The offshore corporate bookmakers (Sportsbet, Bet365, Ladbrokes and Unibet) created the Australian wagering council (AWC). It’s the same thing as bringing a British bulldog into Australia and renaming it an Aussie bulldog. There is nothing Australian about this council. The council speaks on behalf of these bookmakers and have released a statement and a banner to try and stop this tax.

In the statement they continually refer to the consumption tax as a PUNTERS’ TAX (and always put it in capitals to overemphasis it) and go on to say

“this new 15% PUNTERS’ TAX will target South Australians, worsen their odds, and ultimately damage Australia’s uniform responsible gambling initiatives by pushing punters into dangerous and unregulated offshore betting sites.”

Their scare tactics include telling SA customers that they will receive worse odds, less promotions and “less money in your pocket”. They beg their customers to get in contact with their local MPs and have also set up a facebook page. As I write this article there are 57 people who have liked the page (and 99% of them are bookmaker employees).

These bookmakers are terrified of this tax being passed. They know that it won’t be long before every other state government comes knocking at the door wanting their cut of the pie. SA is low down on their list of profitable states. If NSW and VIC ever implemented the same tax, it would be very expensive for the bookies.

AWC Chairman & Sportsbet CEO Cormac Barry also said they would be happy to cover the $500,000 to the gamblers rehabilitation fund directly if they tax was stopped. This is classic corporate bookmaker strategy. They have never been proactive with problem gambling, only instituting programs when they are forced to by the government. They are only ever reactive as issues arise and not proactive. I would give them a little credit if before any of this came up they all banded together and gave money to the fund because it was the right thing to do. But that was as likely to happen as it is for a winning punter to get a bet on with them.

These corporate bookmakers do not care about the punter at all. Their only concern is how much money they can make from the punter. If a punter will not make them enough money they simply stop letting that punter bet with them. They have sent this email to all SA members, and a high percentage already receive worse odds, are bonus banned and can’t even bet with them, yet they expect these people to help them pay less tax.

What will really happen when the tax is passed?

Nothing at all. You will see zero change to the odds you receive, and if anything you will probably receive even more bonus offers. Let’s address each scare tactic from the AWC’s campaign.

1.Worse odds:

The bookmakers are trying to say that any extra tax they have to pay will be passed onto their customers in the form of worse odds. Currently for a 50/50 chance you will receive odds of $1.91 from most corporate bookmakers. They are saying SA customers might have to deal with $1.85 odds or less.

Now this has already been done by William Hill to members who they do not want betting with them. When Racing NSW implemented the minimum bet law, William Hill drastically lowed prices for members who did not lose enough money. So a losing punter would see odds of $2 on a horse and a break even or winning punter would see the same horse but with odds of $1.70.

Luckily for us, the gambling industry has a lot of competition. This competition results in better prices for everyone. Lower prices could be implemented IF every single bookmaker in Australia agreed to do it. But competition being the way it is, it would only take 1 bookmaker (maybe a smaller one not paying much consumption tax) to keep their prices as is and all SA punters would move across to them, making all other bookmakers follow suit or lose even more money.

So there is no way the odds will get worse, and bookies know this. They just want to threaten their customers into doing what they want.

2. Less promotions

The bookies are saying that they can’t offer SA customers the same sort of promotions if the tax is implemented because they couldn’t afford to. Here’s a dirty little secret the bookies don’t want you to know, if it wasn’t for promo bets, they would barely make any money at all. They need to offer these promotions because their target customers rarely bet unless pushed to do so. If they stopped offering promotions to SA customers, they would lose even more money then they will pay via the tax.

We also go back to the competition issue mentioned before. It only takes one and the rest will follow. They might be showing a united front right now, but as soon as the law is passed, it is back to every bookie for himself.

There’s a third reason and this is why it is likely that bonuses will actually get better. The tax they will pay is based on net revenue, which means profit AFTER all expenses have been taken out. This means by paying out SA residents more in bonuses and promotions they will be paying less tax. So by being more generous to SA customers, they not only increase the likelihood of them betting more, but they also pay less tax. As mentioned earlier, bookies only care about one thing (profit) and they will do anything that results in making more profit. In this case it means being even more generous to customers.

So if you are a SA resident and do bet, you should be emailing your local MP and pushing for him to make sure this new tax goes through. Because it will mean the same odds, but better promotions and therefore MORE money in your pocket.

Conclusion

Don’t get me wrong, this is a cash grab from the SA government and the fact that only 5.4% of the money collected will go to help problem gamblers is a joke. We all know how poorly state governments use taxpayers money and allocate it to some extremely stupid things (a topic way beyond the scope of this blog). But the point is that these bookmakers are taking money out of each state and redirecting it offshore.

I believe a point of consumption tax is the correct way to tax bookmakers and needs to be implemented Australia wide. I’m tempted to create a VPN service that shows bets coming from SA so punters can know that 15% of their losses are being put back into the economy.

Your thoughts

There are many of you that are much smarter, more informed and generally better looking than me. I’d like to hear your thoughts on the matter in the comments below.