Point-of-Consumption Tax is a hot topic in some wagering circles already but ALL Australian punters are going to hear a lot more about it in coming months.
In July of 2017, the South Australian Government introduced a 15% Point-of-Consumption Tax to claw back some of the gambling tax revenue it thought was disappearing into other states but the tax itself was first brought in by the British Government back in 2014 as part of an amendment to the 2005 Gambling Act.
As a punter, you may have read about it already and thought “the bookmaker is the one who’s taxed, why do I need to worry” – well in part this is true but as you’ll find out punters may also be affected.
The recent stirring of the Aussie POC pot comes off the back of global wagering giant William Hill’s recent decision to review a potential exit from the Australian market.
“Given the credit betting ban in Australia and the likely introduction of a point-of-consumption tax in a number of states, it is clear that profitability will increasingly come under pressure and therefore we are undertaking a strategic review of our Australia business,” William Hill said in a trading statement.
CrownBet has also been rumored to be ‘shopping around’ as The Australian reported in late December “Crown Resorts has agreed to the $150 million sale of its majority stake in bookmaker CrownBet and expects to complete the divestment by the end of February.” Meanwhile, Tabcorp owned Luxbet announced its closure late in 2017.
There are lots of things happening in the Australian wagering space and, it’s not all positive news like the recent minimum bet law being introduced for Queensland racing.
But first, let’s put a bit more context behind everything point-of-consumption.
How are Bookmakers currently taxed?
Bookmakers are currently taxed via GST (10% winnings from a customer) and of course, they have to pay race field or product fees to the racing and sporting bodies who own the rights to the product. These differ from a cut of revenue to a percentage of turnover that range from 1.5 – 4% depending on the jurisdiction and class of event.
A point-of-consumption tax would theoretically become the third form of taxing the bookie would face before they started to pay expenses.
As Richard Irvine from Fair Wagering Australia recently pointed out, “the big problem with the new tax is that the bookies already pay a POC tax in the form of GST. Sportsbet paid $90 million in product fees and GST on $330 million of revenue (before all other business related expenses) in FY 15/16”
You’ve also got to remember that unlike Pokie machines and ‘fixed loss’ casino solutions that most Australian bookmakers do indeed ‘hold risk’ and therefore have liabilities to cover before they can create revenue (that is then taxed).
From the outside looking in it would appear that point-of-consumption tax would be welcomed by Tabcorp who currently hold a retail monopoly and have revenue sources in other forms of gaming mentioned above.
What states of Australia currently implement a Point-Of-Consumption tax?
South Australia and Western Australia are the only states in Australia currently implementing the point-of-consumption tax.
What states are looking at bringing in a Point-Of-Consumption tax?
All of them. You better believe it!
Queensland made the decision in December that point-of-consumption was in its near future which prompted Stephen Conroy from Responsible Wagering Australian to suggest it was a “naked tax grab” with no consultation.
It is believed by those in the know that the two largest wagering states in Australia, NSW and Victoria won’t be far behind.
Despite recent lobbying from some of the largest corporate bookmakers in Australia, point-of-consumption tax across the board in all major Australian states looks almost a foregone conclusion.
You could argue that the state governments are fighting back against the bookmakers who went to the Northern Territory to get licensed and they are fighting back in a big way.
A recent article in the Sydney Morning Herald noted the following from an industry participant
“Not many bookmakers would even be making a 15 percent margin on their wagering,”
“The downstream consequences for the wagering industry and consumers is very real, and we think the Victorian government is going to pay more attention than the other states have.”
That very same article also made note of a report from Credit Suisse in 2017 that noted the point-of-consumption tax introduced in England that we mentioned above did not reduce wagering revenue when it was implemented in 2014, but the tax did slash industry profit.
It’s vitally important to note however that the bookmakers in England don’t have to pay their equivalent of GST. So, they are only taxed once before product fees.
What are the punters saying?
Richard Irvine recently voiced his concerns over the current structure via Twitter. Richard himself is a punter but makes a logical case for both the punter, operator and state government in his quest to find a ‘win-win’ solution that doesn’t stifle turnover and limit the betting capacity of the marketplace as a whole.
This is a letter to Social Services Minister @DanTehanWannon He can introduce a nation wide minimum bet limit and also sort out the point of consumption tax mess. Please read and retweet if it speaks for you to help get answers. pic.twitter.com/PSgI8mPSam
— Richard Irvine (@riracing) January 16, 2018
What will it mean for the end user – you the punter?
We don’t truly know which is the scary part.
If a bookmaker makes a 10% raw margin off a client this is how it would be divided up under the new proposed structure.
10% to GST = 1%
15% POC = 1.5%
Product fee average 2.5% = 2.5%
So on that 10% the bookmaker has made half of it (50% has gone in taxes and fees) before the bookmaker even starts to pay their bills.
Now don’t get us wrong, while there are a handful of bookmakers struggling in Australia, there are also a few (Sportsbet) that are flying.
Will Sportsbet for example just cop the loss of margin and therefore profit on the chin or will they pass that buck on to the punters and start setting sports markets at 106% instead of 104%.
Or will they move away from ‘value for money’ tote derivative type betting like best of the best and top tote in favor of higher margin products like SP or fixed odds markets well above 130%.
Hopefully common sense prevails and bookmakers aren’t made to pay both GST and POC along with their product fee but it may take some lobbying and trust us when we say, it’s in the punters best interest that the bookies pay as less tax as possible.
What can you do about it?
Go and join the chorus of punters at Fair Wagering Australia. Follow them on Twitter, endorse what parts you agree with and make your thoughts heard in a logical way.
If you’re still not sure on POC but want to stay abreast of movements within the industry then follow of our Twitter feed as well as Fair Wagering Australia.
It is certainly a challenging time for wagering in Australia, but after seeing the mess that is horse racing jurisdictions like the UK and US we can assure you, it could be a hell of a lot worse!
There is a way forward and there is a solution that can work for everyone. Let’s hope that we arrive at that point sooner rather than later!