hobbes
05-09-2002, 04:23
Wednesday, September 4, 2002 Times on turf stay tough JANE MOIR and VANESSA GOULD
Another racing season, another nagging reminder that all is not happy in the valley. Turnover is still tumbling, attendance rates dwindling and warnings of diluted tax and charity revenue again seem inevitable.
The season had an inauspicious start: on the first day, turnover was down 10 per cent to HK$751.3 million from last year's HK$841 million.
It is a familiar predicament for the Hong Kong Jockey Club. Last season, turnover dropped 4 per cent to HK$78.2 billion with attendance down 13 per cent.
Fingers were pointed at sappers such as illicit soccer betting and the slumping economy. Offshore and online bookies took the brunt of the blame, bringing an Internet betting ban. Closure of the Internet loophole was too late to affect the past racing season.
It remains to be seen what - if any - effect it will have on this one. Pervading scepticism and criticism over the effectiveness of the law suggests the Jockey Club may have lobbied in vain.
That being the case, pressure is on for the blame game to cease and concrete blueprints to emerge.
The Jockey Club is in a losing streak. Revenues have declined 15 per cent in five years.
It may be illegal but there seems little doubt soccer gambling - through syndicates or the Internet - is the main force to be reckoned with. A government estimate has put annual soccer betting turnover in Hong Kong at HK$14.4 billion and this does not include this year's World Cup.
Then financial secretary Donald Tsang Yam-kuen touted legalisation of soccer gambling in his final Budget speech last year. Potent opposition from Christian and social groups and a 50-50 split among the general population stalled proposals.
Armed with figures on the World Cup windfall to overseas bookmakers, the public and legislators may be more inclined to sway towards economic reality when the issue comes off the back-burner.
Murray Burton, managing director of International Sports Promotions - which formerly ran Victor Chandler's Hong Kong operations - believes "the pendulum has swung with the World Cup".
"I think the average person has been exposed to an awful lot of soccer on television, they don't see it as a cardinal sin."
Horse racing is also heavily skewed towards older people, according to a survey commissioned by Victor Chandler.
Soccer topped the list as the competition sport most people were interested in watching (89 per cent), with 92 per cent of 18 to 24 year-olds in particular listing it as their favourite. Horse racing is more popular among the 35-plus age group.
Soccer gambling would however throw out another question: is the Jockey Club the right person for the job? Its experience is limited to a no-risk basis.
Mr Burton said: "It's a question of whether they want to get involved in a highly risky business of fixed odds. To operate a fixed odds book is a very skilful and very high-risk business."
As a de facto Victor Chandler lobbyist, Mr Burton says the standard position for his clients is easy: independence or acting through the Jockey Club.
"I think the reputable international bookmakers and offshore bookmakers would be happy to have a situation where we have a licensed, reputable and taxed industry with the government having the real grasp of significant amounts of revenue."
An alternative is restructuring the betting tax.
At present, out of every HK$100 Jockey Club bet a punter gets only HK$81 back, after HK$14 goes to the Government, HK$3 goes to administration costs and HK$2 to charity.
Online bookies and syndicates give much better returns. The club contends bigger returns to punters would increase turnover and make it unprofitable for illegal bookies to operate. It has also long argued for a tax on profits, rather than turnover.
Jockey Club executive director of corporate development Kim Mak said reducing the betting tax "in the long-term may be something the government would consider to really address the issue of illegal betting".
"Betting duty is a very important source of revenue for Hong Kong and it's important for keeping our other forms of taxation low, because the taxes we pay are roughly about 10 per cent of all government taxes."
Tax experts, however, feel the club's "restructuring" argument is flawed in two senses: illicit gambling would remain more attractive anyway and the present tax environment dictates an alternative would have to be found to make up the shortfall.
KPMG tax partner Jennifer Wong said: "A reduction in the levy may not help much. Internet sites are more attractive, they take nothing if you win. The Government should really consider soccer betting."
PricewaterhouseCoopers tax partner Guy Ellis noted a reduction in duty would have to be replaced with an alternative source. An obvious choice would be soccer betting. Save that, any such moves were unlikely amid the current backdrop of "a shift towards direct taxes rather than indirect ones".
Even less likely in the present environment is abolition of betting duty.
Paul Kan, chairman of Champion Technologies and the Hong Kong Information Technology Industry Council, is researching the impact of Internet gambling on horse racing in Hong Kong.
He pointed out that when Britain abolished betting duty in October last year and replaced it with a tax on gross profit, bookmakers' revenue increased.
"What this means is the reduction of betting duty has in fact resulted in increase in turnover and hence increased tax income for the government," he said.
"This is of course the experience in the UK, we need to find out if this is applicable to Hong Kong."
According to a recent study by the University of Nottingham's Betting Research Unit, bookies' revenues have surged as much as 70 per cent.
Tax revenue has however more than halved since the reforms - but the prediction is for tax chiefs to eventually gain from a larger tax base as the industry expands. The initiative came as part of a general liberalisation of gambling laws in Britain.
Mr Burton said: "Liberalising gambling laws . . . if you do that, then what happens is the illegal market - which is hugely prevalent in Asia - becomes effective. Once you have regulated the industry, punters don't need to resort to the illegal market because it is doing nothing for them."
In many ways, Hong Kong seems to be moving in the opposite direction.
"Here you are in a situation where from the first day of racing, the Jockey Club's turnover continues to go down," Mr Burton said.
Another racing season, another nagging reminder that all is not happy in the valley. Turnover is still tumbling, attendance rates dwindling and warnings of diluted tax and charity revenue again seem inevitable.
The season had an inauspicious start: on the first day, turnover was down 10 per cent to HK$751.3 million from last year's HK$841 million.
It is a familiar predicament for the Hong Kong Jockey Club. Last season, turnover dropped 4 per cent to HK$78.2 billion with attendance down 13 per cent.
Fingers were pointed at sappers such as illicit soccer betting and the slumping economy. Offshore and online bookies took the brunt of the blame, bringing an Internet betting ban. Closure of the Internet loophole was too late to affect the past racing season.
It remains to be seen what - if any - effect it will have on this one. Pervading scepticism and criticism over the effectiveness of the law suggests the Jockey Club may have lobbied in vain.
That being the case, pressure is on for the blame game to cease and concrete blueprints to emerge.
The Jockey Club is in a losing streak. Revenues have declined 15 per cent in five years.
It may be illegal but there seems little doubt soccer gambling - through syndicates or the Internet - is the main force to be reckoned with. A government estimate has put annual soccer betting turnover in Hong Kong at HK$14.4 billion and this does not include this year's World Cup.
Then financial secretary Donald Tsang Yam-kuen touted legalisation of soccer gambling in his final Budget speech last year. Potent opposition from Christian and social groups and a 50-50 split among the general population stalled proposals.
Armed with figures on the World Cup windfall to overseas bookmakers, the public and legislators may be more inclined to sway towards economic reality when the issue comes off the back-burner.
Murray Burton, managing director of International Sports Promotions - which formerly ran Victor Chandler's Hong Kong operations - believes "the pendulum has swung with the World Cup".
"I think the average person has been exposed to an awful lot of soccer on television, they don't see it as a cardinal sin."
Horse racing is also heavily skewed towards older people, according to a survey commissioned by Victor Chandler.
Soccer topped the list as the competition sport most people were interested in watching (89 per cent), with 92 per cent of 18 to 24 year-olds in particular listing it as their favourite. Horse racing is more popular among the 35-plus age group.
Soccer gambling would however throw out another question: is the Jockey Club the right person for the job? Its experience is limited to a no-risk basis.
Mr Burton said: "It's a question of whether they want to get involved in a highly risky business of fixed odds. To operate a fixed odds book is a very skilful and very high-risk business."
As a de facto Victor Chandler lobbyist, Mr Burton says the standard position for his clients is easy: independence or acting through the Jockey Club.
"I think the reputable international bookmakers and offshore bookmakers would be happy to have a situation where we have a licensed, reputable and taxed industry with the government having the real grasp of significant amounts of revenue."
An alternative is restructuring the betting tax.
At present, out of every HK$100 Jockey Club bet a punter gets only HK$81 back, after HK$14 goes to the Government, HK$3 goes to administration costs and HK$2 to charity.
Online bookies and syndicates give much better returns. The club contends bigger returns to punters would increase turnover and make it unprofitable for illegal bookies to operate. It has also long argued for a tax on profits, rather than turnover.
Jockey Club executive director of corporate development Kim Mak said reducing the betting tax "in the long-term may be something the government would consider to really address the issue of illegal betting".
"Betting duty is a very important source of revenue for Hong Kong and it's important for keeping our other forms of taxation low, because the taxes we pay are roughly about 10 per cent of all government taxes."
Tax experts, however, feel the club's "restructuring" argument is flawed in two senses: illicit gambling would remain more attractive anyway and the present tax environment dictates an alternative would have to be found to make up the shortfall.
KPMG tax partner Jennifer Wong said: "A reduction in the levy may not help much. Internet sites are more attractive, they take nothing if you win. The Government should really consider soccer betting."
PricewaterhouseCoopers tax partner Guy Ellis noted a reduction in duty would have to be replaced with an alternative source. An obvious choice would be soccer betting. Save that, any such moves were unlikely amid the current backdrop of "a shift towards direct taxes rather than indirect ones".
Even less likely in the present environment is abolition of betting duty.
Paul Kan, chairman of Champion Technologies and the Hong Kong Information Technology Industry Council, is researching the impact of Internet gambling on horse racing in Hong Kong.
He pointed out that when Britain abolished betting duty in October last year and replaced it with a tax on gross profit, bookmakers' revenue increased.
"What this means is the reduction of betting duty has in fact resulted in increase in turnover and hence increased tax income for the government," he said.
"This is of course the experience in the UK, we need to find out if this is applicable to Hong Kong."
According to a recent study by the University of Nottingham's Betting Research Unit, bookies' revenues have surged as much as 70 per cent.
Tax revenue has however more than halved since the reforms - but the prediction is for tax chiefs to eventually gain from a larger tax base as the industry expands. The initiative came as part of a general liberalisation of gambling laws in Britain.
Mr Burton said: "Liberalising gambling laws . . . if you do that, then what happens is the illegal market - which is hugely prevalent in Asia - becomes effective. Once you have regulated the industry, punters don't need to resort to the illegal market because it is doing nothing for them."
In many ways, Hong Kong seems to be moving in the opposite direction.
"Here you are in a situation where from the first day of racing, the Jockey Club's turnover continues to go down," Mr Burton said.