Thursday, 22 October 2009

An industry about to get smaller

Cups time in Melbourne hardly seems the appropriate occasion to write of the racing industry about to get smaller but those people at the Productivity Commission are an unsentimental lot. They came out yesterday with an interim report on the Australian gambling industry and hidden in its lengthy conclusions is a gloomy assessment of the immediate future of racing clubs.

Racing — thoroughbreds, harness and greyhound — has had a declining share of the gambling dollar for decades now as first poker machines in clubs, and then hotels, and then casinos were allowed in by revenue hungry governments.

For a lengthy period the loss of a monopoly position was softened by the creation of off course totalisators which funneled millions of dollars for clubs to clubs to bolster prize money in a way that allowed some horse breeders to become exceedingly rich. More recently that monopoly ended with the Northern Territory breaking ranks with its State Government colleagues and allowing bookmakers to compete with the TABs. Now improvement in communications, and especially the internet, mean that restrictions on competition are impossible as it is possible for competitors to operate from virtually anywhere in the world.
The amount government can levy in taxation for themselves or for the racing industry is severely limited. As the Productivity Commission has reported, “as it is relatively inexpensive to provide online wagering services from offshore locations, some companies may elect to avoid onerous product fees by basing themselves outside of Australia.
If incorrectly designed, measures aiming to reduce free-riding could actually increase it.” This is precisely what is happening now in Britain where the major bookmakers are moving their telephone and internet betting operations to a tax free haven in Gibraltar because of an attempt to increase the levy that has to be paid to racing if they are located in Britain.

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