Treasurer Scott Morrison is mulling the idea of introducing a point-of-consumption (POC) tax for online betting companies, a move that is likely to be bad news for bookies, for the Northern Territories’ tax coffers, and especially for bettors.
Point of consumption means the betting companies will be forced to pay a tax percentage on a all bets taken from players residing in a certain state, rather than simply paying a percentage of gross gaming revenue to the state in which their operations are based.
South Australia has already resolved to introduce the system. From July 1 this year, the state will levy a 15 percent tax on all bets placed within its borders, an emulation of the scheme adopted by the UK at the beginning of 2016.
The UK’s 15 per cent POC is one of the major reasons for the recent clamour for mergers and consolidation among betting companies in that country, which has resulted in hundreds of job losses.
Why It Sucks for Punters And Online Gambling
In a crowded market, online betting companies’ margins are fairly small. Before the UK POC, companies engaging with the UK market were licensed and regulated in kinder tax jurisdictions that had been whitelisted by the UK government.
Similarly, many Australian-facing online gambling companies are licensed, regulated and taxed in the NT, which has carved out a niche for itself as low tax regime.
But Morrison’s proposal is also about a “nationally consistent” approach to taxing gambling companies, “harmonizing” the levy to that magical 15 percent mark. He claims it’s is not about “raising revenue for revenue’s sake,” but more about ensuring “harm minimization” for both punters and national sporting bodies.
The claim makes no sense. If you believe gambling causes “harm” to punters and sporting bodies, and you disapprove of this, then why would you license it?
A higher tax will make no difference to “harm” levels, but what it will make a difference to is the betting companies’ bottom lines, which will result in curtailed bonuses and promotions and less generous odds for punters.
It will also cripple the NT as a licensing jurisdiction, and remove the economic benefits that entails, a fact that may give it legal grounds to sue the federal government.
Furthermore, it will make it more difficult for Australian licensed betting companies to compete with the black market, whose bigger margins will allow it to offer more generous promotions and odds, driving punters into the arms illegal operators, thus maximizing “harm.”
This is precisely about revenue for revenue’s sake; a naked cash grab by the government that will make Australia an expensive place to offer betting. Ultimately, the punter will feel the pinch.