OPM
9th April 2006, 09:30.15 PM
Tax reform 'key to recovery'
Jockey Club plan to lure illegal punters back into fold
ALAN AITKEN
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Winfried Engelbrecht-Bresges: enormous positives
The Hong Kong Jockey Club believes tax reform will create new turnover from abroad and return illegal domestic turnover to a taxable regime.
The move from a turnover tax to a gross profits tax has still to pass through the Legislative Council, but Tuesday's approval by the Executive Council was a victory in the club's sustained campaign to arrest a drop in annual turnover of more than 33 per cent since its peak of $92.4 billion in 1997.
Final approval of the plan would mean a move to a gross profits tax, which would guarantee $24 billion revenue to the government for the next three years and would allow more versatility in how the Jockey Club responds to competition.
While the likely implementation of the planned changes has yet to be made public, talk of lower takeout rates from betting pools or direct rebates to punters is aimed squarely at the illegal operators which, the club maintained as recently as last May, handle a level of wagering "between $50-60 billion a year" - or close to that bet legally through the club.
Executive director of racing Winfried Engelbrecht-Bresges said yesterday the new tax structure would give the club the weapons to fight illegal betting by removing the competitive advantages enjoyed by bookmakers.
"If we have more freedom to restructure the pricing of our product, this becomes a direct hit on the way the illegals do business," Engelbrecht-Bresges said. "The illegal market does not have our overheads, and is able to offer its customers our dividends but with rebates on losing bets. That is money which never makes any tax revenue for the government."
Rebates of 10 per cent are commonplace, with discounts of up to 15 per cent available in the illegal market, but a reduction in takeout rates from legal pools would squeeze the margins of the illegals to make such discounts unprofitable, while rebates on losing bets would hit right at the source of the illegal turnover. "If one can bet legally and get a rebate, who is going to take the risk on betting illegally then?" asked Engelbrecht-Bresges.
But there could be a great additional positive for racing and for Hong Kong through the export of its superior betting to other countries. In December 2004, Engelbrecht-Bresges used the platform of the Hong Kong International Races week to outline a five-year plan to make Hong Kong racing a popular bet with punters worldwide and the tax restructuring is integral to those plans.
"In a commercial sense, there are enormous positives. We are now branding Hong Kong racing from a world-wide perspective and, if we can offer our major bet types at a takeout rate of 10-12 per cent instead of 18 per cent, we will have the best wagering product in the world," Engelbrecht-Bresges said.
Foreign countries which operate betting on Hong Kong racing - Canada, the United States, Australia, New Zealand and Singapore - operate tiny domestic betting pools and pay the Jockey Club a small fee for the right.
A restructuring at this end would leave the Jockey Club with the commercial freedom to offer incentives to those foreign operators to accept bets which would then feed into the bigger Hong Kong betting pools with the prospect of considerable growth since the pools would offer more stability and possibly greater rewards. Punters in other countries, for example, could get the chance to participate in the Triple Trio in the knowledge of a huge dividend pool.
The only other jurisdiction receiving Hong Kong racing and betting into its pools is Macau, as tax issues have stymied export to other interested countries. The Macau link handles only $10 million a race meeting - a pittance - but the spread of Hong Kong betting to a wider audience has a blue sky element which is hard to estimate.
Jockey Club plan to lure illegal punters back into fold
ALAN AITKEN
Prev. Story |Next Story
Winfried Engelbrecht-Bresges: enormous positives
The Hong Kong Jockey Club believes tax reform will create new turnover from abroad and return illegal domestic turnover to a taxable regime.
The move from a turnover tax to a gross profits tax has still to pass through the Legislative Council, but Tuesday's approval by the Executive Council was a victory in the club's sustained campaign to arrest a drop in annual turnover of more than 33 per cent since its peak of $92.4 billion in 1997.
Final approval of the plan would mean a move to a gross profits tax, which would guarantee $24 billion revenue to the government for the next three years and would allow more versatility in how the Jockey Club responds to competition.
While the likely implementation of the planned changes has yet to be made public, talk of lower takeout rates from betting pools or direct rebates to punters is aimed squarely at the illegal operators which, the club maintained as recently as last May, handle a level of wagering "between $50-60 billion a year" - or close to that bet legally through the club.
Executive director of racing Winfried Engelbrecht-Bresges said yesterday the new tax structure would give the club the weapons to fight illegal betting by removing the competitive advantages enjoyed by bookmakers.
"If we have more freedom to restructure the pricing of our product, this becomes a direct hit on the way the illegals do business," Engelbrecht-Bresges said. "The illegal market does not have our overheads, and is able to offer its customers our dividends but with rebates on losing bets. That is money which never makes any tax revenue for the government."
Rebates of 10 per cent are commonplace, with discounts of up to 15 per cent available in the illegal market, but a reduction in takeout rates from legal pools would squeeze the margins of the illegals to make such discounts unprofitable, while rebates on losing bets would hit right at the source of the illegal turnover. "If one can bet legally and get a rebate, who is going to take the risk on betting illegally then?" asked Engelbrecht-Bresges.
But there could be a great additional positive for racing and for Hong Kong through the export of its superior betting to other countries. In December 2004, Engelbrecht-Bresges used the platform of the Hong Kong International Races week to outline a five-year plan to make Hong Kong racing a popular bet with punters worldwide and the tax restructuring is integral to those plans.
"In a commercial sense, there are enormous positives. We are now branding Hong Kong racing from a world-wide perspective and, if we can offer our major bet types at a takeout rate of 10-12 per cent instead of 18 per cent, we will have the best wagering product in the world," Engelbrecht-Bresges said.
Foreign countries which operate betting on Hong Kong racing - Canada, the United States, Australia, New Zealand and Singapore - operate tiny domestic betting pools and pay the Jockey Club a small fee for the right.
A restructuring at this end would leave the Jockey Club with the commercial freedom to offer incentives to those foreign operators to accept bets which would then feed into the bigger Hong Kong betting pools with the prospect of considerable growth since the pools would offer more stability and possibly greater rewards. Punters in other countries, for example, could get the chance to participate in the Triple Trio in the knowledge of a huge dividend pool.
The only other jurisdiction receiving Hong Kong racing and betting into its pools is Macau, as tax issues have stymied export to other interested countries. The Macau link handles only $10 million a race meeting - a pittance - but the spread of Hong Kong betting to a wider audience has a blue sky element which is hard to estimate.