Poker machine reform and gambling taxes

In return for Tasmanian Independent Andrew Wilkie's support for a Gillard Federal Government, it is reported that the Australian Labor Party has agreed to implement reforms to limit withdrawals from club ATMs and implement technology to stem uncontrolled poker machine use on every machine in the country by 2014.

This move, which has the club and hotel industry concerned, has been described in certain quarters as expensive and unlikely to reduce problem gambling. With no exact details as to the form of the legislation, uncertainty remains in the industry as to the impact of the proposed reforms.

Adding to the uncertainty, questions remain as to how the Federal Government would implement the reforms without the States' agreement. With gambling revenue accounting for a significant percentage of total state tax revenue (for example, up to 9 percent in NSW), the States will no doubt be dragging their feet to come to any agreement which is likely to reduce this revenue without satisfactory compensation.

It has been reported that the Federal Government is seeking legal advice as to the enforcement of the reforms without the States' help. Without an express head of power in the Constitution, the Federal Government may seek to rely on such powers as:

• the power over interstate trade and commerce (section 51(i));
• the power over banking (section 51(xiii));
• the power over telecommunications (section 51(v)); and/or
• the corporations power (section 51(xx)).

It appears that this may be another example of Henry Review recommendations again being put on the back-burner. In respect of gambling taxes, and the interaction of the Federal Government with the states, the Henry Review recommended that:

• gambling taxes should focus on recouping economic rent;
• gambling tax concessions should be eliminated for clubs. Subsidies should be implemented through direct expenditure; and
• a review of the allocation of responsibilities for regulation and taxation of gambling should be undertaken to minimise conflicts with state revenue raising and addressing problem gambling.

In light of the deal with the Australian Labor Party, it will be interesting to see if any of the Henry Review recommendations are implemented. We've prepared a more detailed analysis of the Henry Review recommendations and how they may impact the Leisure & Entertainment industry.

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