Iemma’s $500m bet (NSW Australia) on casino tax

Daily Telegraph July 4, 2006

Iemma’s $500m bet

July 04, 2006

THE State Government will go to next year’s election with a casino slush fund of up to $500 million – the up-front fee it is set to receive for the renewal of Star City’s exclusive operating licence.

The new licence has been in negotiation for the past six months and will replace a 12-year deal signed in December 1994 that delivered a lump sum payment of $376 million.

The Daily Telegraph has learned the cash-strapped Government is demanding TABCorp, Star City’s owners, again make an up-front payment to secure the licence to operate exclusively.

The timing of the deal is important, with an election in March and after the Government missed out on the windfall it would have received from the now-cancelled Snowy Hydro sell-off.

Apart from negotiating for money up-front, other matters on the table are the casino’s generous pokies tax rate – which is much lower than for pubs and clubs – and its smoking ban exemption in the high-rollers’ room.

While the pokies tax rate for the biggest pubs is 59.09 per cent and 39.99 per cent for the biggest clubs, it is currently just 24.5 per cent for Star City, including a 2 per cent community payment.

The casino has in the past said its lower tax rate was partly due to the up-front fee it paid and because it had to compete against interstate casinos which also had lower tax rates than pubs and clubs.

An industry source said: “It is well known in the industry that the casino only enjoys its exceptionally low pokies tax rate because it has been willing to make a significant up-front, lump sum payment. The source said every indication was that the Government – which has said it will record a Budget deficit of $700 million next year – wants an early lump sum payment rather than picking up the money through higher tax rates in the longer term.

Last financial year Star City received about $500 million in revenue from poker machines and tables, not including the high-rollers’ room.

The casino operates about 1500 pokies and industry sources estimate the average annual revenue from each machine is about $180,000.

The average earnings for a poker machine in a registered club is about $40,000 a year and about $60,000 for pubs.

Unlike clubs and pubs, the casino does not have to shut its pokies down for six hours a day.