The ACT TAB’s move into Vanuatu is a smart deal all right, at least in the short term.
In the long-term, however, it could be the beginning of the end of cosy government monopolies that extract 15 per cent from every mug punter who wanders into a TAB and in the long-term threatens the nice little earner the Australian racing industry gets from the TAB.
Indeed, the real VITAB story is more about inter-state relations and international competitiveness than about shadowy underworld figures making mega-bucks, though the potential is there for the latter, even if there is no hard evidence for it at present.
This is not a story about racing. It is a story about money. To put it into perspective about $9 billion a year goes through Australian TABs. That is a fraction shy of what the Federal Government spends on defence. NSW gets the lion’s share at $3.2 billion and Victoria gets $2.3. The ACT is small fry at $90 million.
Of these fabulous sums, about 85 per cent goes back to the punter in all states and territories. The rest goes to running costs, state governments and the racing industry in percentages that vary from state to state. (From here on “”state” includes the territories.)
In effect, we have a governmental monopoly of off-course betting in Australia that takes about $1.2 billion a year from the betting public and puts it in its own coffers or gives it to the racing industry and TAB running costs.
The system has worked over the years because state governments have prosecuted competitors (SP book-makers) and have agreed among themselves not to poach each others’ customers by offering a higher percentage dividend or other inducements to bet.
That system is now cracking a little, largely through modern telecommunications and also because some states and big punters have an eye for the main chance.
First a brief explanation of how the TAB works. All the money bet on a race goes into a pool. The computer quickly calculates how many winning tickets there are and declares a dividend that will result in 85 per cent of the pool being paid out to punters. So the TAB cannot lose.
Further, the more money that goes through, the more the TAB gets. So the TAB wants as much money bet as possible. It does not care whether that money comes from very skilled punters who win more than they lose. The TAB just passes its losses to those punters on to the mugs. A bookie on the other hand does not want the custom of the smart big punter. The bookie determines the odds before the race irrespective of his pool and therefore the bookie has to bear the loss.
So it is important for state TABs to attract and keep big punters even though big punters can and do take more out of the TAB than they put in. Sounds bizarre, but it is logical.
The big punters win (they beat the 15 per cent loaded against them) through better knowledge of horses’ form and through being able to cover trifecta combinations better. They also have better statisticians and probability theorists to find the magic time when the return on a horse is greater than the odds.
In the ordinary course of events, the ACT would not matter much. However, the ACT has join Victoria, South Australia, Western Australia, Tasmania and Northern Territory in forming a super pool. All money bet in those states goes into one pool for determining the dividends. This is important. It means that if someone puts a lot on money on one race on the ACT TAB he will not distort the pool and still get a reasonable return.
But they still have to beat the 15 per cent to make money. What if the percentage were lower? Wouldn’t that be nice? If any of the state TAB’s cracked and offered more than 85 per cent the big punters from around Australia would flock to it. Indeed with telephone betting medium punters would, too.
What if punters were paid (in cash or kind) to bet with one state’s TAB.
Well, this is happening now in a small way. Big punters are being wooed with airfares to race meetings, comfortable conditions at the track, computers and modems. Further, some sub-agencies, like PUBTAB get a 2 per cent commission (which comes out of the 15 per cent). Some big punters share that 2 per cent with the PUBTAB operator. A small PUBTAB might not make much. One large punter could quadruple its turnover, so it would be worth paying 1 or one and half percentage points of the 2 per cent to the punter to bet at that PUBTAB.
There is no hard evidence of this. It is not the sort of thing that is shouted from the rooftops.
How does the ACTTAB’s deal with VITAB in Vanuatu fit in to this?
ACTTAB’s deal with VITAB is to provide computer software and hardware and access to the pool. In return VITAB pays ACTTAB one and a half per cent of turnover.
VITAB uses exactly the same computer system as ACTTAB. Its phone system and ticket printing show exactly the same dividends for the same races. In other words, it pays 85 per cent of turnover back to the punter, just like ACTTAB. It has the other 15 per cent to play with. One and a half per cent of it goes to ACTTAB, leaving 13 and a half per cent. Unlike ACTTAB it does not pay 4 per cent to the ACT racing industry or 5.75 per cent to the ACT Government.
It has 13 and a half per cent for operating and marketing and payments to the Vanuatu Government, which I understand to be between 1 and 2 per cent. It has plenty of room to pay punters to bet with it.
This being the case it is essential that VITAB does not attract Australian punters. If it does, Australia will miss out on the 15 per cent take.
VITAB was set up with the purpose of attracting Asian punters. There is no significant market in Vanuatu. Port Vila has a population of only 20,000 and there are about 4000 tourists at any one time in Vanuatu. Incidentally, Vanuatu does not have a racetrack.
One of VITAB’s shareholders is former Prime Minister Bob Hawke who has wide connections in the Asian racing industry. Its three directors are Daniel Kolomanski and Cornelius McMahon both of Melbourne and Oak Limited. The two men are also directors of Gaming Management International. Oak Limited is a consulting company that helps people establish in Vanuatu.
Vanuatu is a low-tax nation with very limited reporting and accounting requirements for companies, compared with, say, Australia, Britain and the US.
VITAB has been very successful. The Minister for Sport, Wayne Berry, announced that in its first six weeks of VITAB trading, ACTTAB had received $20,000. He expected ACTTAB to get $500,000 in a full year. That is one and half percent of VITAB’s turnover. So VITAB’s turnover will be $75 million, nearly as much as ACTTAB’s itself.
In the first six weeks of business this company picked up $3 million in turnover.
This, of course, is all money from Asia. Vanuatu is not that rich. Well, if this money is coming in to Vanuatu from Hong Kong, Singapore and so on, how do we know there is no Australian money going in, instead of going to Australian TAB’s?
There is nothing in the ACTTAB-VITAB contract to stop Australian money or to prevent VITAB from offering inducements, but VITAB has given its word that it will not.
Moreover, VITAB knows that if it is caught taking Australian money it will lose its access to the golden goose, the TAB super-pool. It will also lose ACTTAB computer support. And as all Australian TABs know their big punters’ habits, they will know if a big punter moves.
The ACT, for example, has only three big punters who have stayed put. ACTTAB’s ACT revenue has gone up since VITAB started, so there is no leak from the ACT.
Mug punters from Australia cannot open a VITAB phone account. I was politely told: “”We do not take Australian accounts. It would contravene our licence.”
“”What about betting through an agent?” I asked.
“”No we only accept direct accounts.”
With the removal of foreign exchange regulations and with modern communications, there is nothing illegal or difficult about moving money to a Hong Kong or Singapore to place money on VITAB. There are no Australian controls on what VITAB does with its 13 and a half per cent. It can easily and legally give that to whomever it likes, including favoured punters.
But there is no evidence that that has happened or will happen.
Just over the way from VITAB in Port Vila is the office of Nambawan (Number One in pidgin) Betting Shop. It is run by Allan Tripp a convicted SP bookmaker. His has had several convictions in Victoria and NSW in the early 1980s. The Costigan Royal Commission said he was turning over between $30,000 and $60,000 a day, and, of course, there was no leakage of 15 per cent to the Government or the racing industry. Now his betting operation is legal.
Tripp is the brother-in-law of Peter Bartholomew. Berry acknowledged in the Legislative Assembly that Batholomew had been involved in a meeting with ACTTAB and VITAB in July, 1993, early on in the ACTTAB VITAB negotiations.
I asked Tripp this week whether his betting shop took bets from Australian punters or whether it took bets from Australian punters and passed them on in any way as an agent to VITAB.
Tripp said, “”I have to go. I’ve got three phones ringing. I’ll ring you back.”
He didn’t.
The ACT won the VITAB deal because it had experience in remote computer links as it had set up the computer links for the Northern Territory. The ACT gets between 1 and 2 per cent of NTTAB turnover, in a similar arrangement as VITAB. Also, VITAB thought that it would be a greater proportion of the ACTTAB’s business than if it choose another Australian TAB, so it would be looked after better.
Queensland was after a Vanuatu link, according to its TAB annual report. If the ACT did not do this, another Australian TAB would do it anyway.
Victoria has set up in Vanuatu, but as an agency like its PUBTAB. It does not work like VITAB whereby VITAB determines what happens to the remaining 13 and a half per cent. I understand that the Victorian operation is not doing as well as VITAB. VITAB seems to be more successful at attracting turnover.
The ACTTAB faces opposition from a casino and a limit to the ACT gambling dollar. If it is to return more money to the ACT racing industry and the ACT Government it has to export. It therefore thought that exporting its computing expertise to the South Pacific which would provide a gateway to the Asian gambling dollar.
Why an island in the middle of nowhere which has no racing industry? Because it is a tax haven and few questions are asked about the coming and going of money, so it is attractive to Asian money.
The ACTTAB will do very well out of the deal. And some of ACTTAB’s employees will get wider experience.
For several weeks the ACT Deputy Leader of the Opposition, Tony de Domenico, has chipped away in the Assembly about VITAB. He pointed out the Tripp-Bartholomew connection and pointed out that the VITAB deal only came to fruition after Berry decorporatised ACTTAB, bringing it within the Public Service and replacing racing identity Jim Colquhoun (who has long held positions on racing bodies in the ACT) with Athol Williams who has held positions on the Tuggeranong sub-branch of the ALP.
Berry says there will be no enticing of Australian punters to VITAB. That, of course, includes its Australian directors and shareholders, like Kolomanski and McMahon.
I phoned McMahon on Thursday and asked him about what steps VITAB was taking to ensure there were no Australian punters.
He said I had caught him just as he as going out to a meeting. Could I talk to him for five minutes on Friday. No, he was busy all day and Monday was a public holiday in Melbourne, so it would have to be Tuesday.
Berry insists the deal is good for the ACT. In the short-term he is right. In the long-term de Domenico’s concerns are real.
What follows is a hypothetical. Some large punters put $2 million a year through the TAB. It is inconceivable they will not attempt, though an Asian agent, to bet off-shore (which they can legally do) if the odds are better. And the odds would be better if VITAB offered a rebate of some of the 13 and a half per cent it has up its sleeve, as it is legally entitled to do.
VITAB could quite innocently think it is dealing with an Asian client.
If a $2-million-a-year punter (or syndicate) got a five percentage point cut from that 13 and a half per cent (the bit that if they bet on an Australian TAB would go to the government or racing industry), they would be $100,000 a year better off, which is more than enough to cover phone, transaction and agency costs through, say, Hong Kong or Singapore.
A good $2-million-a-year punter whose horse skill enabled him to get, say, $2.1 million back though an Australian TAB would get $2.2 million off-shore.
How is VITAB to ever know whether the bet coming through Mr Ho Hoho in Hong Kong does not contain Australian money? As Tripp’s successful foray into Vanuatu shows, this sort of money attracts imaginative arrangements.
The VITAB deal, it seems to me, has given the opportunity for Australian punters to get to the Australian betting pool without paying the 15 per cent to Australian Governments and the Australian racing industry.
As betting by computers and modem becomes more prevalent, smaller punters will be able to join in.
Moreover, as bookies on course become able to take phone bets in July and as the Victorian TAB privatises (with the likely abandoning of the interstate 15 per cent arrangement) there will be more competition and more favourable odds for punters.
Inevitably, the days of governments controlling a betting monopoly and taking 15 per cent are coming to an end because of technology.
Given the size of the industry, perhaps it would be a good topic for COAG and a second Helmer report on state enterprises.