Victoria’s horse racing industry jockeys in political-favours sweepstakes

by Zacharias Szumer | Nov 7, 2023 | Business, Latest Posts

The Victorian government and the state’s racing industry share a cosy relationship. The state government helps tax the bookies and passes the proceeds back to the racing industry. The racing industry returns the favour by giving pollies free passes to the races. Zacharias Szumer investigates.

On the most glorious date in Australia’s racing calendar, many Victorian politicians will no doubt be living it up trackside. And while some of the shenanigans in the exclusive marquees will be hidden from public view, most politicians will be happy to wave for the camera.

After all, the state government is, as it says, “proud to support world-class race days.”  And why shouldn’t it be?

It’s an industry that supposedly “generates 4.7 billion for the Victorian economy and is directly responsible for sustaining 34,900 full-time equivalent jobs,” according to a consultancy report commissioned by the industry itself.

Everyone’s a winner baby

In turn, the industry is also proud to support our politicians – some of whom will be attending on the house.

Almost 10 percent of 128 Victorian parliamentarians declared a complimentary Victorian Racing Club (VRC) membership in the most recent Register of Members’ Interests.

MWM has heard that Victorian politicians are regularly offered complimentary annual VRC passes. VRC didn’t respond to questions about how widespread the practice is.

While 10 percent might not seem like a huge proportion, it’s a bit out of whack with the general populace of the state, only 1.4 percent of whom are VRC members.

It’s also evident that, in the past, many more politicians accepted the VRC’s generosity; in 2012, over 35 state parliamentarians declared complimentary VRC memberships or tickets to racing events.

Those who declared memberships in that year included nearly every Victorian racing minister for the last two decades, including the current minister, Anthony Carbines.

Leading gambling researcher Charles Livingstone told MWM:

Racing ministers enjoy splendid hospitality and the privilege of mixing with the beautiful people and the well-heeled at racing carnivals.

“It’s unsurprising that the racing industry gets away with an awful lot that the average punter couldn’t even dream of,” Livingstone said, referring to the state government giving its blessing for over 1000 people to attend a major horse racing event during a period of strict COVID restrictions in 2020.

EPIC Cup favourites from the Snowy stable. Again.

Another drip in the wall

One of the MPs who declared gifts from the VRC in 2012 was John Pandazopoulos, who was racing minister in the mid-2000s when a flood wall protecting the Flemington Racecourse from the adjacent Maribyrnong River was proposed and approved.

After a severe flooding event in late 2022, many suspected that the wall – which had been opposed by several local councils and water experts – had exacerbated flooding in nearby residential areas.

A review subsequently carried out by Melbourne Water found that existing models made it impossible to assess the wall’s impact on the flood.

State opposition and cross-benchers have been scathing of that review and have used their combined numbers to force a parliamentary inquiry with broader terms of reference, which is ongoing.

MWM has sought to obtain Register of Members’ Interests documents from the period when the flood wall was constructed, but has so far been unable to source them. (It appears that the Public Record Office of Victoria may be somewhat understaffed and we do not seek to cast any blame on their friendly staff).

Online bookies from the deep north

While it’s prudent to wait for the findings of the parliamentary inquiry before casting judgement on the government’s approval of the flood wall, it’s not hard to find other examples of state government support for the industry.

For one, the VRC leases crown land from the state government at “significantly below-market terms”, according to its own annual report.

The government also passes on hundreds of millions to the industry from its taxation of bookies, something that has become a crucial source of industry funding in the digital age.

Holders of state gambling licences – whether publicly or privately owned TABs – have always had arrangements to funnel some of their profits back to the racing industry, which hosts the events on which people are betting.

These arrangements were undermined by the emergence of a new class of internet-based bookies in 90s, most of whom set up shop in the Northern Territory, where taxes were at times less than 1 percent of turnover.

Around 30 of the nation’s bookies – including major players like Ladbrokes and Sportsbet – are still licensed in the NT.

These companies take bets on events all over the country, and they’re legally free to do so thanks to a constitutional guarantee of free trade between the states.

With high-speed internet and smartphones, their business has boomed.

In 2006, online bookies combined turnover was reportedly $3.6 billion. By 2017, it was $16.1 billion.

State steps in as tax collector on the bookies

Faced with the NT-based online bookies’ increasing share of the betting market, state governments have jumped in to protect their racing industries.

“The thousands of Australians who rely on a vibrant and growing racing industry and invest their blood, sweat, tears and dollars in putting on the show rightly expect corporate bookmakers and betting exchanges to pay a fair share of that cost,” Victoria’s then racing minister Rob Hulls fumed in 2010.

On behalf of these thousands of Australians, states like Victoria began taxing bookies at the point of consumption – meaning the tax is collected where the bet is made, not where the company is licensed.

Victoria’s tax rate for online bookies will soon be raised from 10 percent to 15 percent, and the cut the racing industry gets from that will jump from around a third to half of the take.

The government estimates that this will generate $462m in 2024-2025. That’s a clean $231m to the industry.

In June, Victorian Greens MP Ellen Sandell asked a state budgetary committee why the industry was getting “four times the funding that homelessness and housing services are getting.”

“The people who look to have support services either through housing or other social services also need a job, and 35,000 of them have a job in the racing industry,” was the racing minister’s reply.

The racing industry is a gambling industry. Duh!

Collecting a share of the bookies’ take isn’t just a matter of principle for the industry – it’s an existential necessity.

“The Australian Thoroughbred Racing Industry is a gambling industry in the sense that off-course and on-course wagering on racing outcomes is the major revenue source for the industry,” the Australian Racing Board acknowledged in a submission to the Productivity Commission some years back.

MWM has sought to understand just how reliant the VRC itself is upon state taxes on gambling, but the club doesn’t make it easy.

In the financial section of the VRC’s most recent annual report, ‘Wagering and Other Racing Revenue’ is a relatively insignificant item, only accounting for around $12.5m.

That’s far less than the $13.5m the VRC earned through tickets and subscriptions, or the $42.9m raked in through marketing, sponsorship and broadcast rights.

MWM is happy to be corrected, but we find it highly unlikely that $12.5m is the total sum the VRC gets from bets made on horse racing. As mentioned above,

the state government alone says it is passing on hundreds of millions to the industry.

In the 2022 report, the largest source of VRC revenue, accounting for over $73m, comes from an item titled ‘Thoroughbred Racing Industry Distributions’.

Nowhere in the annual report is it clearly specified what this refers to but, in betting company reports and official documents from government bodies, the term ‘racing industry distributions’ often refers to payments made to the industry from the proceeds of gambling.

MWM has contacted VRC to clarify what precisely is covered by ‘Thoroughbred Racing Industry Distributions’ but is yet to receive a reply.

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Zacharias Szumer is a freelance writer from Melbourne. In addition to Michael West Media, he has written for The Monthly, Overland, Jacobin, The Quietus, The South China Morning Post and other outlets.

He was also responsible for our War Power Reforms series.

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