South Australia’s pioneering move to tax online gambling companies on revenue they earn inside its state borders at first blush might seem like a modest burden on a $10bn a year industry.
But the rising players of Australian gambling are wary that a defeat in the “contact sport” of one state’s politics will set a national precedent, and this week launched a campaign to match.
Full-page advertisements in the Adelaide Advertiser and the nationwide broadsheet the Australian – the latter likely to have cost about $50,000, according to one media buyer – declared an “urgent message to South Australian punters” about a “punters tax” delivering them “worse odds, less promotions [and] less money in your pocket”.
It’s a campaign seeking in the first instance to flood South Australian MPs’ offices with calls to scrap the tax. Sportsbet’s head honcho, Cormac Barry, has claimed he has a database of more than 100,000 South Australian customers – almost 6% of the state’s population – to call on.
But Ian Fletcher, the chief executive of the corporate bookmakers’ lobby group, the Australian Wagering Council, concedes it is a campaign with “a kind of national echo to it”.
The tax, the first attempt in any Australian jurisdiction to tax bets where they are made rather than where companies are based, would cream 15% off net wagering revenue.
The South Australian government expects to earn $9.2m a year when it is introduced next July.
In one swoop, the Weatherill government would squeeze almost as much from online gambling as the Northern Territory, which enjoys tax jurisdiction over the gross national revenues of most of Australia’s corporate bookmakers.
The big players backing the campaign against the South Australian tax – some of them owned by multinationals based in offshore tax havens – are lured by the NT’s low tax rate on wagering revenue, which is capped at $550,000 an operator.
Figures provided to Guardian Australia by the NT government’s business department show wagering companies paid $10m in taxes and levies on $937m in gross revenue from $9.7b in turnover in 2014-15.
That means that while the NT’s tax take rose a trifling $600,000 over the previous three years, the wagering companies’ gross revenue and turnover nearly doubled.
By comparison, the gaming sector – which includes the poker machines which nationally dominate gambling stakes with half of all punter plunges – in 2014-15 paid more than six times as much in tax and levies ($61m) on just over a quarter of the gross revenue ($243m) and just over a fifth of the turnover ($2.1b).
Bet365.com, Unibet and Sportsbet.com.au are publicly listed as members of the Australian Wagering Council and are among 15 online operators licensed in the NT.
Bet365.com, spruiked on Australian TV by Samuel L. Jackson, is held by a UK-based parent that is licensed for sports betting in the low-tax territory of Gibraltar.
Unibet’s parent is based in the tax haven of Malta.
Sportsbet.com.au is owned by the Irish company Paddy Power, as is fellow wagering council member Betfair, which has been lured to the NT from Tasmania.
The NT government has defended its licensing regime and the 300 local jobs the online gambling industry it creates.
But Nick Xenophon, the South Australian senator and longtime anti-gambling campaigner, dismisses it as a joke.
Xenophon says South Australia now represents “a key battleground” in a vacuum of regulation of online gambling.
He applauds the Weatherill government’s tax proposal as “an innovative way to get some of these multinational gambling operators and these online businesses”.
“They’re squealing now but they’ve had it too easy for too long … These guys need to pay their fair share of tax,” he says.
However, Xenophon calls for a “significantly larger slice of additional revenue going into gambling rehabilitation” than the $500,000 a year slated in South Australia.
That is a figure the online industry has readily agreed to give – its first ever contribution – in lieu of the tax crackdown.
Xenophon says productivity commission research and evidence to a federal Senate select joint committee indicates up to 90% of gambling addicts “do not get any help”.
He will separately pursue a federal bill on online gambling that would add protections for punters, including restrictions on bets made on credit offered by corporate bookmakers.
The tax paid by the online gambling industry, which has prospered through the rise of smartphones which scratch the need for punters to queue at gambling counters or even leave their homes, is not its first controversy.
It has shelled out millions of dollars a year in secret commissions to businesses and individuals who referred new clients. And it has banned customers that win too often for its liking.
All the while it takes a growing slice of the national betting market, a market that Fletcher says by qualification is static, growing only in line with population.
Sports betting, the bulk of the online space, accounts for just over 2% of all Australian gambling.
The online gambling companies maintain their profits come on low margins in a market with few barriers to entry and without the monopolies granted in various states to traditional bricks and mortar bookmakers.
“When it comes to tax, the starting point is that responsible licensed operators already pay GST, payroll tax, company tax on their profits [and] they don’t have a monopoly,” Fletcher says.
More immediately, the online companies report the South Australian tax would have a “material” effect on their operations, he says.
Fletcher complains of “a degree of voodoo economics” in the South Australian government’s projected tax take, saying it is not clear on what basis it is calculated.
He would expect it to be more than $9.2m in any case, although says he is “speculating”.
Online corporate bookmakers are subject to “savage competition” from a world of online betting, ranging from overseas-licensed operators to “outright crooks” who are unregulated but easily accessible to customers, Fletcher says.
The lack of “long-term market power” for operators means it is not simply a matter of passing on costs to customers.
The result of the impost in South Australia will be “prices up, product range down, then you’re likely to see over time less money to bid for racing information and sporting codes”.
The South Australian government’s move is “ill thought-through, it’s a mess, it’s disruptive, there’s been no clear consultation”, Fletcher says.
It also steps ahead of any federal regulation after the O’Farrell report into illegal offshore wagering, he says.
Fletcher says the South Australian treasurer, Tom Koutsantonis, is “very confident” other states will follow with a place of consumption tax.
“I am confident the position of other states is mixed,” Fletcher says.
“Some of them may well be thinking about it but I know others are distinctly more cautious about the proposal and the practical implications.”
This includes the “not trivial” accounting and technical challenges of recording bets not just by customers with South Australian postcodes but who also happen to be in the state when they bet.
Asked how confident he is that the wagering council’s campaign will successfully knock over the South Australian tax, Fletcher says: “Frankly the answer is too soon to tell.”
State politics is a contact sport, he says, and governing parties can generally get their measures through.
The industry’s desired outcome is “a pause and an opportunity to reflect on broader issues of regulation” nationally, like advertising and regulation of offshore operators.
Guardian Australia asked treasurers’ offices in Victoria, New South Wales and Queensland if they were considering adopting the SA measure.
Queensland treasurer, Curtis Pitt, said his government was “not actively considering … at this time” a similar step. It is understood the NSW government has the same stance.
Pitt said “any changes to online gambling would be best implemented through nationwide reform”.
No response came from the Victorian treasurer’s office.
But there is power in precedent, and states looking for revenue in their next terms of government could well consider following SA’s suit if it stands.
It is, after all, much easier to follow. Cash-strapped state governments will be observing the scale of any political backlash to South Australia’s move.
