State governments love monopolies but racing will miss them more

The so-called commitment of State governments to competition policy has been made a joke of again - this time by Victoria with promised legislation to allow a betting exchange to operate in the state. The decision to licence an exchange, like Betfair which operates from Tasmania, was announced on Melbourne Cup eve by Deputy Premier and Racing Minister Rob Hulls. But there will be no new entrant into the wagering business with the new business to go to whichever organisation takes over the operation of the TAB from 2012.
Clearly the government decision is intended to provide an incentive to someone to take over the operation of the totalisator in a way that minimises the compensation the government will have to find to pay the existing operator Tabcorp for handing over its existing infrastructure and agency network.
Watching in a rather horrified fashion from the sidelines as Mr Hulls tries to ensure a future for the racing codes at somewhere close to their existing prosperity are Racing Victoria Limited, Harness Racing Victoria and Greyhound Racing Victoria. These three controlling bodies are beginning to understand that there is a real risk they will receive far less revenue from the new totalisator operator which will not have a share of poker machine revenue. Their chairmen last night issued a joint statement in response to the Government’s "announcement of wagering tax reforms for the new wagering licence to offset the loss of VRI (Victorian Racing Industry) gaming revenue from 2012 and to legislate for a review and adjustment process for ensuring the tax rates meet that objective."
The joint statement is clearly sceptical that the Government decision to reduce the government tax take from wagering will provide sufficient compensation. It said:
“The diversity and growth of gaming revenue has been a critical asset to the VRI since 1994 and its loss must be fully addressed.
“We will work with the Government to ensure that there is an agreed safety net that properly takes into account the full extent of the loss of the VRI’s ongoing normal gaming revenue and the future growth it would have achieved over the period of the new licence had the gaming licence structure not been changed.
“It is imperative that the Government work closely with the VRI to develop an effective mechanism that will adjust the tax rate to fully meet the loss of gaming revenue and that the partnership agreement between the VRI and the new licensee delivers the funding arrangements that are necessary to secure a viable and growing foundation for the VRI’s long term prosperity."
This is going to be a messy and troubling negotiation for the racing industries as the Treasury will be reluctant to continue the generosity that then Premier Jeff Kennett bestowed on them when he privatised the TAB. The gambling industry has changed considerably in the last few years after the Northern Territory Government broke ranks and gave favourable taxation conditions to corporate bookmakers and the High Court hinted thatrestrictions on advertising by them were illegal.
A glance at the advertisements in the Melbourne Cup form guides shows how the corporates are appealing to anyone half serious about having a punt. Tabcorp has joined in with its own corporate bookmaking business to add to the poaching of tote turnover and by 2012 the agencies it must be prepared to hand back will be the expensive to operate dinosaurs of the betting business.
Those international invaders lining up at 3pm for a share of that $5.5 million in prize money should enjoy it while they can. The way things are going the horses will be racing for considerably less in the Melbourne Cup five years from now.

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