A Pollie & The Punt: It’s Not Pretty

A SA politician got it wrong on social media

Tom Koutsantonis racing industry

I should start by saying I really don’t want to bag politicians who get on Twitter and actually engage with people. Few of them do it. Worse than just not doing it, however, they have accounts set up anyway which are clearly just run by staff parroting PR garbage and spin.

There’s a few exceptions. Victorian Racing Minister Martin Pakula is good value, for example – actually using Twitter like a human being – but most aren’t worth your time.

So good on South Australian Shadow Minister and former Treasurer Tom Koutsantonis for speaking to people on Twitter. Long may it continue.

But what he put out on Wednesday night… wow.

In joining in a discussion regarding the point-of-consumption tax and its impact, Koutsantonis unfortunately seemed to confirm what many already suspected: politicians simply don’t understand how betting and the wagering markets work.

Which wouldn’t be a massive problem, except for the fact that they’ve subjected the industry to a massive new tax, basically without any consultation or planning whatsoever.

The effect on punters, in terms of market percentages, is plain to see. In Koutsantonis’ own state of South Australia, we have bookies such as BetEasy actually offering punters lower dividends than those in other states…. an unprecedented move.

Koutsantonis’ initial point seemed to be that although the government in which he served as Treasurer implemented the PoC tax in South Australia, the real problem was that none of the revenue from it has been passed back to the racing industry. As his former government said it would be.

That’s true. But in trying to sell his point, there’s some extremely troubling statements. Here’s a selection:

Firstly, to say “bookies winnings were untaxed” is just disingenuous. All bookmakers do – and always have – paid taxes, just like any other business. Their net revenue is subject to GST, like the goods and services of nearly all businesses. Their profits are subject to company tax, like all other businesses.

Saying “bookies winnings were untaxed” is like saying “supermarket profits are untaxed”. It’s simply not true.

Yes, states have various other gambling tax grabs. Most large corporate bookies have largely avoided these by basing themselves in the Northern Territory.

This was just a case of laws and tax policy lagging well behind industry and environmental changes, as they tend to do. Gambling used to be state-based: everybody in a certain state bet with that state’s TAB. Now it’s not – it’s national, and online, has been for over a decade.

Instead of responding to that change in environment by cooperating with an appropriate restructure (say, a national bookmaker licensing and taxation scheme), the state governments have just done what’s easiest for them and whacked a mishmash of their own new tax grabs on punters in their states.

This was maybe the most puzzling of Koutsantonis’ statements. Bookmakers are offering lower odds because of lower prizemoney?

It’s hard to see how that could be true in any way whatsoever.

It’s actually extremely straightforward as to why bookies’ odds have dropped:

They used to take a bets of $100. They’d pay back $90 in dividends. They’d pay taxes, product fees and other expenses of $6, and have $4 in profits left for their shareholders.

Now they have taxes, product fees and other expenses of $7.50. So what are they going to do? Tell the shareholders “sorry guys, you’re now only getting $2.50”? Of course not. They’re public companies. They do that and their own Armageddon occurs: the share price tanks.

So they pull the only other lever they can. Rather than paying out $90 in dividends to punters, they pay out $88.50. They’ve recovered their lost cash from the punters and they keep the most important people of all happy: their shareholders.

And who’s paid? The punters. Not the bookies.

Most concerning for racing is punters have options. They don’t have to bet, and if they’re just losing more money, some simply won’t. There’s hardly a shortage of entertainment or investment options in 2019.

Or, even if it is now illegal, it’s not hard to bet overseas and avoid all these taxes. If we assume punters are rational consumers – which they are – that will surely happen to at least some extent. And then the money is gone – none of it is coming back to the employers (bookies), the racing industry, or the government.

As multiple people told Koutsantonis, a market that serves everybody should be the goal, shouldn’t it? It’s about balance.

To keep punters, who provide the money, relatively happy. To keep wagering operators, who facilitate the betting, relatively happy. Most importantly, to keep the whole thing growing, which keeps the product fees rolling in to sustain the racing industry, and brings tax in for the government.

And keeps Australian punting money where it belongs: in Australia.

Surely,a former state treasurer understands that the racing industry and betting markets do not, and will never, exist in isolation. They’re irrevocably entwined.

It’s why all parties need to get together, take a step back, and fix the whole structure. Nationally. Licensing, betting rules, bookie behaviour, product fees and taxes. Only then will there be a vibrant, expanding market that’s attractive and truly looks after market participants and the racing industry in a sustainable manner.

We’ve got a stable of profitable punters and analysts who are here to do just that.

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