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Poker Machines - Are they really the evil that we must have? I suppose depending on which group you listen to your views could be swayed either way. The proposed tax by the government certainly isn?t what you would call the clearest concept from State Government, however will it really be the ?doom and gloom? or ?godsend? that certain groups are saying it will be?
First off lets try and look at what the increase poker machine tax is intended to do. The plan is to raise an additional $1.6 billion per annum for the NSW Government by 2011 which is meant to be re-invested back into the state health system. As anyone who has been to a hospital in NSW would know, there clearly is never enough money you can give to such a valuable service.
Now looking further into the structure of the tax it is clear to see that the large increase will not come all at once. Rather it will progressively move up from the current value of 26.5% up to around 40% bringing it in line with the other states in Australia, and still less than South Australia.
The move is designed to only affect those clubs which earn over $1 million per year from poker machine revenue meaning that two thirds of clubs in NSW wont be affected by the change. However it isn?t those clubs who wont be affected that are raising the current issue.
With NSW being the home of poker machines, having between 18% - 48% of the worlds poker machines depending which sources you believe, and what constitutes as a poker machine, its no wonder the government wants a larger slice of the pie.
Last year poker machines nearly made clubs a nice $3 billion worth of revenue, or around $2.2 billion after the poker-machine tax. Out of this $2.2 billion only $56 million to sporting groups, charities and community organisations, so around 2% of the revenue. Now this is where the poker machine tax problem becomes quiet tricky, see people for the increase in the tax will kindly forget to mention that from that revenue there are a large number of expenses. Wages, maintenance and of course the poker machine licences all eat away at that $2.2 billion quiet significantly. How much so, well again its another matter of who you listen to and who you believe.
Now it is clear changes will need to happen at the clubs, membership fees are likely to increase, same with meal prices and alcohol. Trading hours will possibly be reduced and some staff may lose their jobs. Similar to how Telstra was run for a number of year being privatised, many of the clubs have developed a philosophy of spending money simply cause they have it, instead of possibly being as efficient as they could be. The Panthers club certainly must raise many eyebrows into where all the money goes when the Leagues club earns $56 million after tax on poker machines but then end up with a final profit of only just over $2 million. Sure it has a lot of expenses, and it does contribute around $2-3million to the Junior Rugby League, Panthers and other community organisations, but lets not forget on the other side, the poker machines aren?t Panthers only source of revenue.
That raises the other questions of course, do we want the clubs to turn into commercialised businesses only focused on making a dollar rather than the social venue that they are. Most likely we don?t, but if they were a bit better run, it possibly wouldn?t hurt.
Now will the community organisations who receive funding be worse off from the tax? Yes and no would be the easiest way to put that. Still under law, the top earning clubs will still have to contribute 1.5% of their poker machine revenue into the Community Development and Support Expenditure scheme (CDSE). This may drop slightly as a result of the tax, but most likely will stay reasonably consistent. The machines will still be used by people whether the tax is 1% or 100%.
Next already the State Government gives tax rebates of $33 million to the clubs, out of their $56 million in community grants. If the clubs threaten to no longer supply this funding, the government can simply use it, itself to give to the appropriate groups.
Also onto NRL clubs, they currently providing a significant amount of the revenue which goes back into the junior development, and this is not money from the Leagues clubs. In fact out of the 10 NSW based clubs, possibly only 3 are overly reliant on Leagues clubs, with the other 7 either not having a Leagues club, or earning enough in revenue at the moment to continue on if their contributions stopped.
Next if history has shown us anything, it will tell us that community groups should be alright. Remember back in 1997 when the club industry protested that the introduction of poker machines into hotels would see their poker machine revenues slashed by at least $419 million annually? ClubsNSW then said that this would result in slashed community and sporting donations.
The reality has been that since 1997, clubs have annually increased their poker machine revenue by an average of $900 million.
Then also in 2001 when the NSW Government announced a freeze on poker machine numbers across the state? ClubNSW prompted a similar fear campaign from clubs who argued that there needed to be growth for the industry to remain profitable. The reality has been that in the last two years, clubs have once again increased their revenue by an average amount of $400 million annually.
Will revenue from poker machines continue to rise after this tax? Well it economic trends show us anything, they will slightly, before plateauing out, leaving the opportunity for clubs to continue to grow as a result from the machines.