by Brian de Lore
Published 17th May 2019
Racing Minister Winston Peters delivered another piece of the racing industry jigsaw puzzle solution this morning at Karaka when he announced his government was repealing the betting levy for racing as part of Budget 2019.
In his speech to an attentive group of industry participants, he said: “As Messara pointed out, the New Zealand Racing industry could and should be performing at a comparative level to other jurisdictions – for example, as in Australia.
“For this reason, the Government will repeal the current betting levy that is taken from racing and sporting gambling profits. By repealing the levy, this money will no longer flow to the Crown – it will instead be retained by the racing industry for the development of the racing industry.
“The funds will be distributed to the racing and sporting sectors, with part of the funds to be set aside to support a reduction in gambling harm initiatives. This is not small change,” emphasised Peters. “This levy represents four percent of betting profits, and in 2018, it amounted to approximately $13.9 million.
“The levy will be progressively reduced over three years until it is phased out entirely,” he said, but surprisingly his speech made no mention of either a synthetic or all-weather track for Cambridge or the personnel make-up of RITA which replaces NZRB on July 1st. Those announcements are still pending.
Some racing pundits will be disappointed about the three-year phasing out time, instead of it coming back 100 percent immediately, but remember that all these concessions the Minister gains for racing require negotiation with Treasury with whom Peters has been seemingly fighting the 100-year war.
When Messara lobbied the NSW government for tax parity, it took him forever to get it, and even then, the tax concessions were phased out slowly over five years. But it was a landmark win for Racing NSW, and for his perseverance and guile, it was the part of the reason Messara received his Heroic Award, Member of the Order of Australia, and more recently Longines IFHA International Award of Merit. They are three of six big awards he has received – all for racing.
In New Zealand, we haven’t had the luxury of a Messara or a CEO of the calibre of Peter V’landys. But when examining the long-list of racing ministers, it can be safely said that Peters is the only one to have delivered significant tangible benefits, and he has done it in both his terms as Minister of Racing.
In his first stint, 2005 to 2008, he repealed a racing tax which had immediate benefits of $33 million annually and today continues to benefit the industry to the tune of $65 million annually. The tragedy of that gain is that most of the money has been used to mushroom the NZRB gravy-train rather than filter through to needy industry stakeholders.
Having read the Cabinet papers several times since their release over a month ago, it’s was easy to convince yourself racing would be getting more in this announcement than subsequently received. But that assertion was based on the number of budget-sensitive redactions over the three Cabinet papers which numbered 31, and then an overly optimistic reviewer.
Two years ago, Winston talked about the battles he had with Treasury over various issues for racing, and it appears to have been no different this time. In Cabinet Paper No 1 it seems evident that Treasury has little regard for the racing industry. Treasury was just one of many government bureaucracies consulted to complete the suite of Cabinet Papers which also included the State Sector Commission, Inland Revenue Department, Ministry of Foreign Affairs and Trade, Ministry of Health, Te Puni Kokiri, Ministry of Justice, Sport New Zealand and Ministry of Primary Industries.
Treasury came up with all sorts of hurdles and was negative. It talked about, “significant regulatory and financial implications for the Crown; the risks relating to greater gambling harms as a result of the proposals, including any wider impacts on wellbeing; the impacts on New Zealand consumers (gamblers), including whether they will face higher or lower costs; and the impact on the financial position of the New Zealand Racing Board.”
The last one is a beauty – indicating empathy between those two organisations. If you are worried about the financial impact on NZRB but are oblivious about the plight of the racing stakeholders then, “Houston, we have a problem.”
Politicians do deals to get things rubber-stamped and although no evidence has been put forth to suggest the Minister had to concede ground on getting the betting levy eliminated, the fact that it has to be phased out over three years suggests it was hardly likely to be in the Minister’s plan.
Quite the opposite. In the Executive Summary of Cabinet Paper 1, it talks about “the immediate need for supplementary revenue; an urgent need for reform; financial viability from a commercial perspective; and a requirement for bold and deliberate decision-making.”
The Minister understands the urgency for racing’s plight but knows, at the same time, the legislation to right the ship long-term is attainable only through cumbersome and slow bureaucratic processes. We are getting closer though – only six weeks away from the of Bill No. 1 coming before Parliament if MAC and DIA collectively keep to their tight schedule.
Consider the impact of the two Bills. With the collection of racefields and Point Of Consumption (POC) levy, $30 million a year will come back to racing – revenue not previously collected. Australia started mustering this tax in 2008, and that’s one reason we have been left behind – all having resulted from the work of people like V’landys and Messara.
Add to that the savings derived from outsourcing the TAB and its subsidiaries such as broadcasting – a further $70 million a year. Total $100 million back to the codes above what they were getting and the feasibility of Messara’s claim of doubling stakes becomes a reality.
That doesn’t take into account the massive up-front, lump sum fee at outsourcing negotiation time, which is money that could go back into badly needed infrastructure upgrading of facilities at racecourses.
To manage it correctly requires a fundamental change of thinking at an administrative level; a more business-like approach which has been AWOL at NZRB.
Whatever happened to the plain, simple logic of good, sensible business practice? The two components of income and expenses. If your income exceeds your expenses, then you make a profit. If the income reduces for whatever reason, the most controllable component in business is the expenses, and so you cut your cloth accordingly.
That basic rule-of-thumb is unknown at NZRB. The decline in profit has coincided with increased expenses, and it’s been going on for a long, long time. It’s called ‘denialism’ which is a psychological condition of human behavior.
Denialism is when a person or group of people avoid reality as a way to avoid a psychologically uncomfortable truth. It occurs when a seemingly intelligent and sane adult vehemently denies truths despite a body of irrefutable data. That’s what’s been happening at NZRB.
It’s either denialism or when you have no skin in the game you just don’t care. Take the recent round of NZRB Industry Conversations, as they have been calling them, as an example. Last week it was Hastings, and next week it will be Riccarton. The salaries of the three executives involved probably totals $1.2 million or around $5,000 a day. Auxiliary expenses such as airfares, transfers, lunches, dinners, accommodation if required, and anything else, could easily bring it up to $8,000 or $9,000 per day.
They are preaching for little over an hour to a mainly elderly group of around 30 people, half of whom have come for a cup of tea and sausage roll FOC. The other half are mainly retirees with a genuine racing interest – few trainers or working participants can get along in the middle of the day.
The question is, what quantifiable return is racing to get for this expenditure – the algorithm to measure it doesn’t exist – this industry needs a ‘nonsense to nonagenarian’ meter – it would have gone off the scale! As well, no apparent concern about the wastage of industry money is in evidence from either the protagonists or the dozing nonagenarians.
The culture will be changing, though. RITA will get the Messara Report done and dusted inside a year, and when that happens, the industry will have a spring in its step that’s been missing for years.
Racing’s livewires ‘Boys Get Paid’ will be out in force making their presence felt and redefining the standards for the enjoyment of racing – Luke has posted his debut blog here on this site today and will regularly contribute as we wait and hope for the emergence of a new racing weekly. Onwards and upwards.
