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  • Court Case between Racing NSW and Betfair Australia and Sportingbet

    Lads, what is your take on the decision handed down today by the High Court regarding betting agencies having to pay 1.5% tax on turnover (rather than profit) on NSW racing?

    I have some views on it but would like to see yours regarding where Betfair go from here. Also what you think it means for racing in other states. Will they follow suit?

    What about the arrangements in place in Victoria? Are they going to continue as they seem to be working well.

    And people are making comparisons with fuel companies to explain what will happen. So I will do that and just leave Ned and Dags to comment.

    When a government places a tax increase on a fuel company, the company does not pay one cent of it.

    The company simply increases the price of fuel and the consumer pays. The same is going to happen here with the stupid carbon tax which may piss me off enough to return to the UK, especially if Betfair here die.

    So Ned, how will the Bookies deal with this now and what do you guys thing will happen?
    --
    My site: TheSportsTrader.com

  • #2
    Originally posted by The Badger View Post
    Lads, what is your take on the decision handed down today by the High Court regarding betting agencies having to pay 1.5% tax on turnover (rather than profit) on NSW racing? My view is that I consider the decision handed down today not to be in the future overall best interests of racing. Some of the reasons have been well publicised in recent months and you'll get my drift with some of the responses below

    I have some views on it but would like to see yours regarding where Betfair go from here. Also what you think it means for racing in other states. Will they follow suit?Again my view here is Victoria definitely wont follow suit. There was a question mark regarding Queensland however we have just had elections here and the Government has changed. The new Racing Minister is Steve Dickson and if the scuttlebutt is correct
    then we'll see some changes in Racing Queensland. I would expect therefore that Queensland wont follow suit. Not so sure about South Australia. My two bobs worth would probably be on them joining ranks with NSW. Definately expect NT not to follow and Western Australia is too far away to have an impact.


    What about the arrangements in place in Victoria? Are they going to continue as they seem to be working well. Victoria is the shining light in terms of racing administration in Australia. They are proactive, innovative and genuinely work hard at making racing a successful enterprise for all concerned. NSW should look across the border to see how committed folk can make racing work for the benefit of all parties.

    And people are making comparisons with fuel companies to explain what will happen. So I will do that and just leave Ned and Dags to comment.Badge...its true what you say here. In practise the only way Betfair or Corporate Bookies can recoup the cost is to reduce the percentages on offer to the punter or in BF's case increase the commission rate. Either way clearly its a backward step for punters and Corporates alike. The only other real alternative is to cease doing business in NSW and relocate to a State or Territory that is encouraging Corporates.

    When a government places a tax increase on a fuel company, the company does not pay one cent of it.

    The company simply increases the price of fuel and the consumer pays. The same is going to happen here with the stupid carbon tax which may piss me off enough to return to the UK, especially if Betfair here die.

    So Ned, how will the Bookies deal with this now and what do you guys thing will happen?
    Hope this is helpful.

    Comment


    • #3
      Here is copy of Betfairs press release re the High Court decision.
      The full bench of the High Court of Australia has today rejected Betfair’s claim that the decision to impose a 1.5% wagering turnover fee for the right to publish NSW race fields was unconstitutional on the grounds that it is discriminatory and protectionist in its nature.

      Betfair was given special leave to appeal to the High Court, seeking a declaration that the fee placed a discriminatory burden on Betfair’s ability, as an inter-state operator, to compete with TAB Limited, an intra-state operator in New South Wales.

      Betfair’s claim did not challenge the race fields legislation itself, which gives racing bodies the right to impose fees on wagering operators. Betfair has always maintained that wagering operators should pay a fee to the racing industry.

      Betfair Australasia’s CEO, Giles Thompson, said, “We’re obviously disappointed with the decision. We maintain our belief that a gross revenue model is the fairest basis on which to tax wagering operators.

      However the High Court has made its decision and when the dust settles we hope to sit down with the NSW racing bodies and endeavour to reach a commercially viable arrangement for the future.

      “This finding essentially means that it is six-times more expensive for Betfair to offer New South Wales racing to customers compared to offering racing from any other state in Australia.

      “A turnover fee will place extreme pressure on our ability to continue to offer our customers what we believe is the best product in the market.

      “It will directly and significantly reduce the competitiveness of wagering on racing in NSW. It is ultimately the punter who will pay for this lack of competition as it will impact on the variety, quality and value of betting on racing in NSW.

      “Despite this setback in NSW, Betfair remains optimistic about its position in the Australasian marketplace – we will continue to approach the future with a great degree of confidence and enthusiasm.”


      NOTES TO EDITORS

      • Betfair is Australia’s only licensed betting exchange. A betting exchange is a wagering operator – just like the TAB or a bookmaker – but it relies on state of the art technology to enable it to operate in a similar way to the stock exchange by effectively matching bets by punters with opposing views about a particular race or sporting event.

      • Betfair Australasia is a 50:50 joint venture between Crown Limited and Betfair Group plc and has been licensed in Tasmania since February 2006. Betfair Australasia currently employs approximately 160 people in Australia – most of who are based at the company’s operational headquarters in Hobart.

      TIMELINE OF COURT PROCEEDINGS

      • Betfair issued proceedings against the NSW racing bodies in the Federal Court of Australia in September 2008 alleging that the turnover fee was in breach of section 92 of the Constitution because it discriminated against Betfair and was protectionist in nature.

      • In June 2010 the Federal Court of Australia found that the fee did discriminate against Betfair as compared to the NSW TAB however Betfair failed to prove that it was protectionist in favour of NSW TAB.

      • In November 2010 the Full Court of the Federal Court of Australia rejected Betfair’s appeal. Betfair obtained special leave to appeal to the High Court of Australia.

      • In March 2012 the High Court of Australia rejected the appeal of Betfair and ruled that the turnover fee imposed by the NSW racing bodies was not in breach of section 92 of the Constitution.

      Comment


      • #4
        Here are some further thoughts now that I have had some time to consider the High Court decision and its ramifications. In essence the argument was never about paying for race fields. The debate centered around the methodology of how the payment was constructed. Betfair wanted the payment to be based on profit. In simple terms they were willing to pay a fee equivalent to 10% of the profit they made from racing in NSW. This increased to 15% during the carnivals.
        Racing NSW said no......they wanted the fee to be a set 1.5% of turnover. That's a similar structure that existed with Bookmaker turnover tax that one used to pay weekly to the State Government for the pleasure of fielding. The harder you worked your business and the more turnover you achieved (usually by tweaking the knobs of a short priced favourite up a notch or two) then the more you paid.If you were lucky the racing body might reward you with a better positioned stand so you write more business (at a reduced percentage level) and pay even more tax.
        I assume the reason Betfair (and others) wanted to pay on the profit turnover basis was that trading could be a fly in the ointment here. In other words Betfair wouldnt want to be in a position of paying turnover for example on a scratch trade bet.
        No doubt the much maligned CEO of Racing NSW Peter V'Landys will be receiving plenty of congratulatory back slaps as a result of his determination in this matter. To his credit he stood his ground and managed to salvage a win from a game of poker where the stakes were in excess of $100m. But with the win comes responsibility and there will be a tendency amongst the hawks to drive home the advantage. This may initially be instructions to the Federal police to prosecute those who dont pay....both domestic and internationally. Fines of up to $1m apply so again the financial incentives to pursue this are there.
        My concerns if they play hardball is they will end up killing the golden goose. Human nature being what it is suggests to me that Racing Boards who want capital to undertake infrastructure projects and increased prize monies will look at the 1.5% turnover rate and they will vote to increase it.
        So the value seeking punter will position more of his spending dollar in the sports betting area. Well that may happen however the danger here is that AFL, NRL and others may simply adopt a mirror image of whats happening and then our sights could well turn elsewhere.
        Personally I hate taxes and I hate protectionism.
        Yesterdays High Court decision is not a positive step for the trading fraternity. One can only hope that rational men from both camps with cool heads will gather under the one roof and calmly achieve a common sense agreement out of this for the betterment of all parties.
        I'm not holding my breath that this will happen.!!

        Comment


        • #5
          I think that the days of trading on Australian racing are coming to an end (firstly in NSW and then the other states later). Unless of course Betfair can explain how their turnover is generated. I don't think a small increase in Betfair's commission will be enough to cover the cost if they have to pay on the matched amount. If this is the model, then on my current turnover they would have to pay about $150,000, currently they get about $15,000 from me through the premium charge. The corporates will be even more ruthless in closing winners accounts. They are not going to cop a percentage on a winner's turnover. Unfortunately, I fear I am going to have to go back to studying the form like I used to do. Hopefully, there will still be an edge on Betfair, otherwise it will have to be the TABs.

          Comment


          • #6
            ..There is always that tendency for bad Business Executives with turnover in decline , finding the scrap heap by increasing prices in an effort to remain in business..... Mr V'landy has already proved he is prepared to spend up by employing has beens under the name of liasion Officers , making promises of $200 a week to stable hands , increase prizemoney [ which he decreased ] etc and more etc.
            He now has to deliver or he hasn't had a win , in fact he will have had a big loss if NSW were to be isolated from the huge turnover stimulated on his product through the big money traders .... On course Bookmakers are 90% traders in reality..... Our racecourses are only a get together for for pizz ups and the mugs money on course finds it's way to the Tote and corp. pool anyway.
            Curtains if that roundabout is interupted .
            History has proven NSW Racing forced Billions of dollars and most of their Brain over the borders... Is this another shot in the foot for them over time.
            Ned has covered the way to go , by negotiation but I won't hold my breath on that either .
            I beleive Mr V'Landy will self destruct , Just like Bob Carr [ former Premier of NSW ] did when he introduced heavy fines and long gaol sentences for anyone resident in NSW betting with off shore Exchanges etc.
            He ran when the chit hit the fan on NSW finances and left his troops to be over run..... The likes of V'Landy and Carr soak up the "positive " publicity . Then disappear when painted into a corner.
            , .... Really Interesting times ahead....... The V'Landy $100 M won't fund him for long
            For what it is worth I see The premier racing state of Victoria could be the big winners here and I hope Betfair withdraw from servicing NSW Racing unless a middle ground solution is negotiated.
            Surely our Mr J Packer's 50% share of Betfair Australia will carry some weight along the trail ahead.

            Comment


            • #7
              Some interesting thoughts and intelligent observations from Panic and our old mate Macca. Thanks Guys.

              Here are todays selections for Rosehill.
              Dags has hopped across the ditch and is doing an impression of a party animal somewhere in New Zealand. Hope you have a great time Dags!

              Race 1 no 1 Doubtfilly e/w
              Race 2 No 1 All Too Hard is a special
              Race 3 No 5 Anise e/w
              Race 4 No 1 Rain Affair is a special
              Race 6 No 8 Pied A Terre is an each way special
              Race 7 No6 Strike the Stars, from Laser Hawk with Silent Archiever and Said Com to fill the first four placings
              Race 8 No 4 Older Than Time from Herculian Prince
              Race 9 No 1 Curtana from Phenomenal Lass

              Comment


              • #8
                Originally posted by panic View Post
                I think that the days of trading on Australian racing are coming to an end (firstly in NSW and then the other states later). Unless of course Betfair can explain how their turnover is generated. I don't think a small increase in Betfair's commission will be enough to cover the cost if they have to pay on the matched amount. If this is the model, then on my current turnover they would have to pay about $150,000, currently they get about $15,000 from me through the premium charge. The corporates will be even more ruthless in closing winners accounts. They are not going to cop a percentage on a winner's turnover. Unfortunately, I fear I am going to have to go back to studying the form like I used to do. Hopefully, there will still be an edge on Betfair, otherwise it will have to be the TABs.
                Hi Panic,
                At this point I dont think it will come down to a return to the dark ages. To try and return to a monopolistic scenario will only force folk to find alternatives...just as they did years ago with SP, offshore offices and heavens knows what. I can understand some reluctance to allow Corporates to pay on a profit percentage basis....as again this leaves a door open for discovering some late bets etc etc. Commonsense needs to surface here for everyone to compete on a reasonable basis otherwise Rafferty's Rules will apply.
                I understand V'Landy is on Sky News at 9.00am EDST on Sunday morning so that may give an insight into his current thinking.

                Comment


                • #9
                  I hope you are right Ned.

                  This is from the ruling (http://www.austlii.edu.au/au/cases/cth/HCA/2012/12.html). It looks like Betfair did not do much to help their case, its almost as if they thought they would win.

                  74. Even if the inquiry is limited to the appellant's own position, the evidence was not favourable to its case. Its chief executive officer, whose credibility was praised by the trial judge, admitted that the fee had not reduced the number or type of New South Wales thoroughbred or harness races on which the appellant sought wagers. He accepted that the appellant had not altered its commission structure in response to the fee. He acknowledged that the appellant had not introduced a premium charge in response to the fee. He admitted that there was no connection between the introduction of the fee and the odds offered by the appellant's customers. He also admitted that since the fee came in there had been no change of substance in the commissions which the appellant charged or the odds it offered. He further admitted that the appellant had not altered its "marketing spend" in response to the fee. He agreed that the fee had not caused the appellant to lose a single dollar of back bet turnover and that the fee had not caused the appellant to lose a single dollar of commission. He admitted that the fee had not caused the appellant to change its competitive behaviour in any way in relation to its dealings with customers and its attempts to win business away from competitors. He admitted that though an examination of the appellant's future conduct in the event of defeat in these proceedings was under way, no plan for change had been developed. And he agreed that the appellant's planning documents projected the achievement of "very substantial" and "healthy" targets notwithstanding the imposition of the fee. He did not assert that the appellant would cease to compete or to trade profitably, either at all or in relation to horse races in New South Wales. Nor did he assert that the appellant would not continue to gain market share.

                  Anyway, I suppose time will tell.

                  Comment


                  • #10
                    Gents,

                    Have been trying to confirm the actual impact of the turnover tax on Betfair and its likely ramifications. It also looks on the surface at least that all of the States and Territories and the AFL and NRL will adopt similar or identical practices in terms of a turnover based tax. There has been several comments made that it will cost BF SIX times as much to have NSW racing as part of their service compared to other States.
                    Here is confirmation of that cost from Betfair:

                    “This finding essentially means that it is six-times more expensive for Betfair to offer New South Wales racing to customers compared to offering racing from any other state in Australia.

                    “A turnover fee will place extreme pressure on our ability to continue to offer our customers what we believe is the best product in the market.

                    “It will directly and significantly reduce the competitiveness of wagering on racing in NSW. It is ultimately the punter who will pay for this lack of competition as it will impact on the variety, quality and value of betting on racing in NSW.


                    Now if you extrapolate this to every racing state and then add in the sports that will inevitably hop on the gravy train then Betfairs future here looks bleak...particularly if you are a trader. If you want proof of that try working out the impact of backing a horse at $1.01 and having $20,000 on it and you'll see what I mean.

                    The post from Panic above suggests that Betfair didnt help its own cause by stating the likely effect of the tax on its business future and if thats the case then questions should be asked. I assume their principal angle was along the line that the tax was in breach of the Trade Practices Act and therefore they hung their hat on this approach.
                    Its interesting to read the expectations of owners in terms of increased prizemoney...even strappers will get a share of prizemoney however the reality is that much of the income will be used to fund infrastructure. No doubt that everyone will be keen to get their hands on a share of the pie so expect the scene to be reminiscent of a flock of seagulls fighting over a hot chip.!!
                    Thanks Panic for your excellent contribution...I'm still confident that Betfair will continue on but not so confident that traders will be able to conduct future business in a profitable manner.
                    V"Landy has an interview on Racing Retro this morning at 9.00am so lets hear what he has to say regarding BF and the future of racing in Australia.
                    I'll post again if any noteworthy matters arise.

                    Comment


                    • #11
                      Here's an update following the Racing Retro interview.
                      V'Landy's annual financial expectation of the Race Fields Legislation turnover tax is between $40m and $50m. Now thats just for NSW. He admitted that Racing NSW was about to reduce prizemoney if they lost the case. In other words their business model was incapable of supporting the sport in NSW and has been deteriorating downhill since that nasty thing called private enterprise competition emerged in the past decade. Yet he was very quick to judge Betfairs business model as (and I quote) flawed.!!
                      An interesting question was posed by one of the panel which asked the question "Was he (Peter V'Landy) the man for peace?". His response was to avoid a direct yes or no answer.
                      I did get the impression that he was going for the jugular here and that may be good news for the racing industry in general. It spells nothing but bad news for Betfair here and to a lesser extent Corporate bookmakers.
                      I can see the day fast approaching where all States adopt the turnover tax model. If they do then wind your watch back 20 years as it will back to the TAB with their 115% plus percentages.
                      Last edited by ned_3; 1st April 2012, 1:29 AM.

                      Comment


                      • #12
                        That is ALL this is about. Protection of the *^^#ing TAB and its monopoly. Ok I admit that if the TAB was not there, racing is not there but I must be missing something. If a bookmaker has a two horse race at 1.95 each of two and takes $1 million on each, he makes $1m on the loser and pays out 950k on the winner so they make 50,000 right?

                        So if they have to pay out 1.5 on turnover then they pay $15,000 (unless you count the million on both runners so it would be $30,000 on $2m turnover) so they make $35,000 (or $20k) (then they take out government tax and expenses from that) so I understand that and it is ok. So all we will see there is now the best price will 1.92 and from the same bets they will pay out $920k and not $950k. They just tighten their margin.

                        But Betfair???? I posted several screenshots on Twitter over the weekend showing me turning over $1200 to $1600 per race and making $20 - $30 per race. So even at a maximum 5% (which I don't pay) Betfair would make $1.50 in commission on my profit yet have to pay $24 on the turnover. Am I missing something here Ned?

                        Betfair simply cannot afford to offer NSW racing if the above is accurate. They will just have to become a corporate bookie and offer back bets only on NSW racing and when it spreads to other states, the goose is cooked.

                        So boys, help me out, what am I missing here?
                        --
                        My site: TheSportsTrader.com

                        Comment


                        • #13
                          Originally posted by The Badger View Post
                          That is ALL this is about. Protection of the *^^#ing TAB and its monopoly. Ok I admit that if the TAB was not there, racing is not there but I must be missing something. If a bookmaker has a two horse race at 1.95 each of two and takes $1 million on each, he makes $1m on the loser and pays out 950k on the winner so they make 50,000 right?

                          So if they have to pay out 1.5 on turnover then they pay $15,000 (unless you count the million on both runners so it would be $30,000 on $2m turnover) so they make $35,000 (or $20k) (then they take out government tax and expenses from that) so I understand that and it is ok. So all we will see there is now the best price will 1.92 and from the same bets they will pay out $920k and not $950k. They just tighten their margin.

                          But Betfair???? I posted several screenshots on Twitter over the weekend showing me turning over $1200 to $1600 per race and making $20 - $30 per race. So even at a maximum 5% (which I don't pay) Betfair would make $1.50 in commission on my profit yet have to pay $24 on the turnover. Am I missing something here Ned?

                          Betfair simply cannot afford to offer NSW racing if the above is accurate. They will just have to become a corporate bookie and offer back bets only on NSW racing and when it spreads to other states, the goose is cooked.

                          So boys, help me out, what am I missing here?
                          Badge I dont think you are missing anything here. I agree that the objective is to remove as much competition from the marketplace as possible. This recreates a monopoly similar to what existed 10-20 years ago. Yes Betfairs cost of doing business will increase 600% and you can see why when you do the sums. My unverified understanding of the calculations is that the turnover figure does not include laybets...it only applies to back bets. Thats why the example I gave of a back bet of $20,000 at $1.01 is a good illustration of the worst aspect of this tax ....and probably is why BF wanted the tax to be calculated on a percentage of profit basis.
                          Again I am having a guess here but if the other States were to follow suit as their current arrangements with BF and others expire then I expect the annual income distributed to the State's will be roughly $180-$200m in total. My expectation is that NSW will achieve $45m, Victoria $75m and the balance will go to the other States and Territory's.
                          Betfair has some tough decisions ahead. I expect the ambit of their discussions will go from folding their tent...to absorbing all or some of the costs....to recoup some or all of the costs via increased commissions and premium charges..or to try and negotiate a better deal with NSW. Good luck with the later. The concern with moving forward with this is the likelihood that Racing NSW will be tempted to move the goal posts by increasing the race fields levy from 1.5% to 2%...and if that doesnt knock out the opposition to TAB's then hike it again to say 2.5%.
                          The first casualty from our perspective here is more then likely to be traders doing business on NSW racing. Then as the other States follow suit (and there are plenty of perceived reasons to do this) then gradually traders will be knocked out of the ring as the charges will make it impractical to continue.
                          I'm sure there will be plenty of further news about this subject shortly.
                          Last edited by ned_3; 2nd April 2012, 12:22 AM.

                          Comment


                          • #14
                            Unless things have changed, the 1.5% is on total turnover, so $30k would be correct. This is one the reasons that bookies on track have been in decline for years, they pay even if they lose. Corporates have also taken most of the mug money. As I mentioned above, on a turnover model, I would have to pay about $150,000 as a trader. Even 20% of that would make it ridiculous to continue. Betfair has never been popular with the authorities in Australia, and I think they will now basically make it unviable to continue here (unless the Tasmanian Government has some influence, which I doubt). If Betfair pull out of NSW or elsewhere for that matter, they will not give a damn, in fact they will be ecstatic.

                            The corporates also give me the s....ts. I have'nt been to the track for years, but bookies there are I think still compelled to lay a certain amount on their board price depending on where they are on the track (rails has to lay more than the outer rings), regardless of who the punter is. Sportsbet are saying they won't pass it on to their customers, but obviously they don't bet to winners and are not compelled to do so as they do not have the same rules. What they will do is quietly increase their margin to make up for the difference and most of their punters will be none the wiser.

                            Just a question Badger, how do you pay less than 5% commission, I have been paying the 20% premium charge for a long time now.

                            Comment


                            • #15
                              What I meant is nobody actually pays 5%, because as you accrue points it drops down to a minimum 2% or even less when we were at Centaur because you can negotiate with them based on turnover (until now).

                              As for the premium charge, as I mention on my courses and privately to clients, there is a very simple way to avoid paying it. There is no reason anybody need ever pay the premium charge. In fact one of my contacts, a highly successful Sydney operator spoke to Betfair last month and checked how he was rolling and was told he would need to win $4 million on Betfair before he had to worry about the premium charge.

                              I will not post the reasons on a public forum but suffice to say only people that do 100% of their business on Betfair would be paying it. And I certainly don't do that!

                              Private message me your phone number Panic and I will give you a shout and fill you in. Or get me on Skype.

                              The corporate bookmakers should be forced to lay any punter, any bet to $1000 liability the same as the ring bookies. The fact we all have to have seven hundred accounts in wives, sisters, uncles and brothers names is just diabolical.

                              It is enough to drive a bloke to Blighty! (again)
                              --
                              My site: TheSportsTrader.com

                              Comment

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