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Australia's Turnover Tax, The ABC's Of Screwing Up a Good System

If you talk to any player in racing, you'll often hear - when a decision of some sort comes down on the gambling side of the game - "don't these people ever bet?" There's a reason for that. Mainly because well, I don't think many of them do bet.

If any of you have enjoyed the game again betting on an exchange, like betfair, you know exactly what I'm talking about. If you haven't, while this may be greek to you, but if you want to read on, please go ahead.

In-running betting is a new way to play racing, where when a race goes off, the odds change and you can back a horse (go long the horse, or bet the horse to win), or lay a horse (go short the horse, or bet him to lose). Most in running players do some laying, or "green up" their pre-off positions to try and make the most money. Smaller players, looking to enjoy the excitement of betting a race in-running, tend to go long, so these players provide a ton of liquidity and make the market.

Like the stock market, where you buy a stock at $1 and sell it later for $1.05, for say, $500 profit minus a $8.95 commission at your favorite online broker, this type of betting is taxed in a similar way. If you buy a horse for $1000 at 2.0 and sell $1000 at 1.96, you made a few dollars, and were taxed at a % of your profits. Clearly, the exchange can not tax you at 15% takeout, because you'd owe $150 on your bet, and you only made $40. That would be silly.

However racing - in their infinite wisdom - challenged this set up in Australia. They wanted a tax on turnover, instead of gross profits and did exactly that.

This in turn, of course, changed a betting game for customers of racing in that jurisdiction.

Via an Aussie blog:
  • Since the High court decision, a number of 'traders' on NSW racing have been asked to cease operations - including yours truly. Overseas residents have also been contacted, which can be a dilemma as they may need to check the location of the racecourse they'd like bet on! If you are new to the exchange or you're betting in very small amounts you're probably OK for a while.
  •  Traders enable liquidity and generate interest in markets.  This in-turn stimulates wagering via the TAB and bookmakers - with players looking to lay-off/arbitrage/take advantage of better odds. All this generates funding to the racing industry and provides owners with better returns. Why most of the powers that be can't sit down and work this out I'd love to know. I think the term 'vested interests' comes into play.
This is astounding for a sport that is clinging to its very existence in a number of parts of the world.

"....a number of 'traders' on NSW racing have been asked to cease operations"

Racing is telling these people not to bet. In fact, you'd have to be insane to even make a bet, because for the first time in gambling history, you'd win a bet, and owe racing more than you won.

It's 2012 and we need every possible outlet to reach people. We need differentiating products to use as loss leaders. We need new ways to play to get at people who never even would look at us. We need big companies trying to gain new customers by spending their marketing money that we don't have. We need partners, we need technology. We need dynamic pricing, so people who want to trade and follow the sport, can trade and follow the sport. That's exactly what exchanges, in running betting, traders and tech geeks are trying to do.

We should never be doing anything that encourages people not to bet.

For the folks in racing who fought long and hard to get this turnover tax done for the 'good of the sport' - congratulations, you succeeded in driving away customers.


kyle said…
Speaking of not ever doing or saying things to make people not bet. On today's Steve Byk radio show Tony Black related a story about how he once bribed a fellow jockey not to claim foul. I don't think Black would characterize it as a bribe, But as Black told it, his owners had bet big for him and themselves when during the running he had to squeeze through a tight spot and he may have impeded the other horse. After the wire he engaged the other jockey in conversation and in that conversation he offered his rival $500 for not objecting. Now, he told this story as though he found it hilarious. He also hinted the story was one of many he could tell. Black wondered if what he had done was even a crime, and if it was, so what, the statute of limitations surely has expired. Byk laughed it up with him. Although I'll point out, Byk would not repeat the story later to Steve Haskin. He was aware how unseemly it was. He just lacked the guts or didn't want to rock the old boys club by questioning Black's lack of ethics. Listen, apparently the incident happened some time ago and the harm done may have been nil or nothing. The incident doesn't bother me, although there are implications that do. What if a conversation occurred before the race. "Hey, we got the money down. Make sure I have room to run." And what kind of message does this send to younger guys? What bothered me most today were Black AND Byk's attitudes. I have a good sense of humor. Little is out of bounds to me. But one thing I don't find funny is the abuse of the public trust. I know the culture is entrenched, but can people who care about racing continue to shrug off stuff like this - the 1000 paper cuts? Listen to Black yourself. See what you think. It was during the 10 o'clock hour.
Anonymous said…
'Racing is telling these people not to bet.'

I think it's more the case that racing is assuming that these traders will simply substitute their activity with punting on any of the three totes in 120% markets.

The only 'good' of the crusade for such is to the short term gain of Tabcorp...and the long term detriment of punters, racing and even Tabcorp itself.

The best long term future of racing is not even remotely a part of the considerations of those who are responsible for these decisions.
Anonymous said…
A great article. As a player in Australia it's extremely frustrating what's happening down here.

I can't remember a betting product that was introduced, proved to be successful and then taken away.

As you say, 'they' don't appear to want our money
Anonymous said…
They think they can take more and people will still bet at the same levels. They've thought that for years and never learn.

Pull the Pocket said…
Thank you for the comments folks.

Kyle: I will check out the show. I hadn't heard this story, although I did see someone mention it on twitter.

Anonymous said…
If the stock market did what they did in Australia to downunder punters, there would be no stock market...... volume per day would be 50 shares, traded by arithmetically hallenged dumb people.

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