State and territory governments are increasing their stranglehold on the shrinking pools of racing revenue funds through Point Of Consumption Taxes (POCT) on wagering. The public sell is “harm minimisation” and a “level playing field”. The reality is protection of the state base totalisator licence holders from corporate bookmakers who have innovated and brought competition to what was a stagnant retail betting sector.
The end result will be the further erosion of punters from racing codes in states and territories that have the POCT. The POCT is not a tax on corporate bookmakers. It is a tax on punters. The POCT will be passed on in full to the punter.
Free bets were the first to go. Deposit bonus offers and signup bonuses will go next. Then the returns on each race to the punter will be decreased over time. We are already seeing it. The traditional 115% market on a race has been replaced by 122% markets. The basic rule of thumb in the past was that a bookmaker would payout 25% of the win odds on a place bet. But already we are seeing bookies paying out 20% of the win odds.
How does this affect the average punter who is not fixated on value and market percentages?
The best analogy we can use is that of a poker machine. The pokies payouts in most states in Australia are around 85%, and even higher at online casinos. But focussing on the brick and mortar pokies in Australian clubs, pubs and RSL’s; the 85% payout rate means that for every $100 invested, the machine is legally bound to payout on average $85. As the money gets turned over, the punter playing the pokie ends up with less and less in his kick over time. His $100 becomes $85 , which becomes $72.25, which becomes $61.41, and so on; decreasing by 15% every time the money is turned over.
So now introduce a POCT at 10%. Now the poker machine’s payout for every $100 has dropped to 75%. For every $100 invested our pokie player now only gets back $75, then $56.25, then $42.19, and so on. Our punter is going broke quicker. Not only is he going broke quicker, but as the punter can’t last as long; the turnover on the machine will go down as well.
Racing revenues, fees and taxes have long been linked to turnover. With decreasing turnover, those revenue streams shrink. By introducing a POCT, state and territory governments haven’t penalised corporate online bookmakers; they have diverted funds directly to government as a tax which may have otherwise gone to racing codes as race fields fees or turnover taxes.
So what about our average punter? He doesn’t give a fat rat’s about how thoroughbred, standardbred and greyhound codes pay for prizemoney, he’s only interested in a punt here and there. Well like our pokies player, the average punter won’t be getting as much back on each winner he backs. His return for each $100 he invests will effectively go down because the price he will be able to get on his winner is now less than it was without a POCT.
Let’s look at a simple greyhound race with just two greyhounds with equal ability. In 100% market, the price offered would be $2.00 about each greyhound. Bookmakers don’t offer 100% markets though, or they would not earn anything for the effort to provide and take bets and to pay their taxes and fees. So they adjust the markets above 100% to create a edge so they get an earn from the process. Let’s say they adjust the market to 110%. The price of our two greyhounds is now $1.82, down from $2. If you put $100 on each greyhound, you could only ever get back $182 for your $200 investment. The $18 difference is the bookmakers earn.
Now lets introduce a POCT at 10%, so our market on this greyhound race goes from 110% to 121% (10% x 110% = 11% plus our original 110% market). In a 121% market our two greyhounds are now only $1.65 each. So our punter can only ever get back $165 from his $200 investment. The end result is the same as with our pokies player. Our average punter goes broke faster, turns over less money, and inevitably gets less enjoyment and less entertainment value from the experience. So our average punter is now betting less, and is more inclined to not bet anymore, or bet less on greyhound racing, or maybe bet somewhere the POCT isn’t affecting his returns.
So a POCT diverts revenue from racing industry direct to the government. The POCT reduces the returns to the punter. The POCT in all likelihood decreases turnover. And the POCT most likely impacts the enjoyment and entertainment value of a bet for average punters, and affects the profit margin or Profit On Turnover (POT) for serious punters.
Like the “Punters Club” which moved its “official” operations to the Isle Of Man from Australia some years ago after a legal stoush with the ATO, many punting syndicates which drive turnover will be looking twice at Australian wagering. Perhaps electing to do their business outside Australia, where they can often punt on the same races and sports events; without the onerous burden the POCT will pass on to the market odds.
The same may be true of the serious punter who is price sensitive and interested in his POT. He or she may elect to bet with offshore bookmakers where the POCT and other taxes don’t affect market percentages and odds.
The average punter who used to enjoy betting may just stop betting. He no longer enjoys it anymore as the money doesn’t last as long as it once did.
So who benefits from a POCT?
State and Territory governments benefit from a POCT.
Who pays for the POCT?
The punter. The punter always pays.