Federal Group Wants Tax Relief for Pokies Concessions

Monday, August 21st, 2017 | Written by April Bergman
Federal Group Wants Tax Relief for Pokies Concessions

The Federal Group wants the Tasmanian government to give its two casinos a tax cut in exchange for concessions to pubs and clubs over poker machines. Federal Group’s 44-year old monopoly over pokies is being challenged, as some lawmakers want the group to hand over ownership of pokies to Tasmanian pubs and clubs.

Between its land-based casinos, pubs, clubs, racetracks, and casino cruises, Tasmania has 108 gambling establishments. 94 of those gaming enclaves are pubs and clubs, small businesses with a handful of pokies apiece.

In any drinking establishment in Tasmania which has poker machines, those pokies are leased to the establishment by Federal Group. Currently, negotiations are underway to allow those pubs and clubs to own poker machines outright, when the new licensing deals begins in 2023.

Federal Group to Lose $15 Million from Changes

Federal Group says it would lose $15 million a year in income, if the current plan was approved. To offset that loss of cash, says Greg Farrell, Tasmania needs to cut the 35% tax rate on gaming machines.

While discussing with a parliamentary committee about a new arrangement with the Tasmanian Hospitality Association, Greg Farrell said, “At the moment we’re looking at — for want of a different word — a single license operator who’s able then to spread the tax burden over casino premises, and licensed hotels and the clubs, the game of Keno and table gaming.”

Sell Pokies to Tasmanian Pubs and Clubs

Farrell described a future arrangement in which Federal Group would be in competition with the THA. Under a competitive environment, then the casino company would need tax breaks. He explained, “If you then fast forward to a future model where the casinos are separate from the network, then the casinos would require to have a taxation arrangement, a system that’s more fit for purpose for them being competitive against other like-sized regional casinos.”

Tasmanian Tax Rate on EGMs

Daniel Hanna, Federal Group’s Corporate Affairs Officer, said his company was not looking to change the tax rate on electronic gaming machines (EGMs) in pubs and clubs. Hanna said, “I guess it’s fair to say that under this proposal the tax rates in casinos on EGMs would be consistent with other regional casinos around Australia. In Cairns and Townsville and I think in the Northern Territory as well they are around the 20 per cent mark.”

By mentioning the 20% tax rate found in pubs across much of Australia, Daniel Hanna might have been signaling the lower tax rate Federal would want under the new circumstances. Federal’s argument might be that their company would be at a disadvantage vis a vis the Tasmanian clubs and pubs, if they received a lower tax rate than the Tasmanian casinos.

Australian Brick-and-Mortar Gaming Companies

These would appear to be halcyon days for the Australian brick-and-mortar gambling corporations. Tabcorp and Tatts are near completing a merger between $9 billion and $11 billion, depending on the source. Those companies, along with land-based casino companies like Crown Group and the Star Entertainment Group, convinced the Australian national parliament to pass an effective ban on foreign online gambling operators. Such a ban is expected to be a boon for the Aussie gambling monopolies and duopolies, because they had trouble competing with foreign operators.

Now, the Tasmanian land-based gambling companies seek tax relief. Those companies claim they face significant losses if they do not receive a tax break. That might be the case, but it also shows that a government can expect only so much from gambling revenues. Once a gaming company is entrenched, they want to use their status as big taxpayers to keep out other competitors — or get a tax subsidy if more competition is approved. The Federal Group is no different than top companies in Macau or Singapore, or tribal gaming operators in California. No business wants competition and all are willing to plead poverty, if they do get it.