Betfair and Racing NSW are going toe to toe in Australia's Federal Court building today over the issue of gaming taxes.
Betfair is seeking to challenge the current tax arrangement imposed by Racing NSW which they claim to be anti-competitive and unfair in view of their business model. This arrangement sees Betfair paying a 1.5% tax on turnover - the same as the incumbent NSW TAB operator Tabcorp. But Tabcorp, a parimutuel wagering operation that has a substantial margin to play with (around 15% of all bets placed are retained by the operator) can more easily afford a tax calculated on turnover. A 1.5% turnover tax equates to a levy of around 10% of gross margin for Tabcorp but around 60% of gross margin for Betfair.
Betfair want taxes calculated by reference to gross margin rather than turnover. They claim that their high turnover low margin model makes the turnover tax cost prohibitive. Racing NSW contend that gross margin is metric that is too easily manipulated. They are also reluctant to aid Betfair's march to becoming the betting vehicle of choice for a growing number of NSW punters.
Player migration from previously monopolistic-like terrestrial betting options to more competitive online options is a common theme around the world. For decades Tabcorp and totes like it have been able to offer punters odds reflecting their high margins in the absence of competition. Now that better, more competitive odds are available online, these agencies are finding harder to win their share of the wagering dollar.
Interestingly enough, Racing NSW's mission statement demands it deliver the NSW thoroughbred racing industry 'improvement in its competitive position and increased financial returns to constituent stakeholders'. Clearly 'stakeholders' doesn't include the punters that the industry is built on.
This consideration was not lost on Australia's Productivity Commission who in a recent report recommended introducing a national betting model based on gross profit claiming that the current turnover tax model favoring high margin operators (ie the TABs) was delivering racing punters a raw deal.
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