The various Australian TABs may not be out of the woods yet, despite the clearing of the air by this week’s VITAB inquiry. The TAB structure that enabled the VITAB scam is still in place and though one hole has been patched others might well appear.
If you go back to the 1960s there was a huge amount of illegal SP bookmaking. Under SP, the bookie set the odds at the time of the bet and if your horse won you got those odds. The skill of the bookmaker was to ensure that the totality of the odds he set combined with the likelihood of each horse winning gave him a return over time, perhaps as much as 15 per cent, but it was a competitive business.
Politicians tried to eradicate SP book-making by setting up state-based TABs. TABs worked differently. People put their bets on horses, but the odds or pay-out was not determined until after the race was won. All the bets on a race were added up (totalised) and paid to the winners, less a cut for administration, tax and to help the racing industry. That cut, typically, is 15 per cent with the remaining 85 per cent being paid in winnings.
The TAB cannot lose. And the more turnover it gets the more money it makes, irrespective of which horses win. Indeed, since the VITAB fiasco the new board has gone out to increase turnover with some success.
Nonetheless, the 15 per cent take for tax, the racing industry and administration gets up the nose of some big punters. They would like a higher return.
Remember it is an average of 85 per cent. Typically big punters might get a 105 or 110 per cent return on their money because they back winning horses more often, whereas as the mass of mug punters might average only a 60 or 65 per cent return. In a totalised system like the TAB, the big punters make a profit out of the mugs.
But the big punters would like less leakage of their winnings to tax and the racing industry and they are doing their damnedest. VITAB was just one way. In theory VIATB was for Asian punters to lodge bets in Vanuatu. These bets would go into the pool comprising the ACT, Victorian and some smaller state TABs. But they would not get just the 85 per cent average winnings. They would get an additional 10 per cent because the ACT Government and ACT racing would forgo their share. The other 5 per cent would go in ACTTAB and VITAB administration and profit.
Of course, there were no Asian punters. The bets were going to come from Australian punters. These big punters who might through their skill and knowledge of picking winners return 105 per cent in Australia would return 115 per cent through Vanuatu — at the expense of the ACT Government, the ACT racing industry and mug punters throughout the ACT, Victoria and smaller states. (NSW runs in separate pool.)
This only works, of course, if the pool is very large with a lot of mug punters. And TABs only work if there is a reasonably clean and well-run racing industry.
Other ways big punters can avoid the 15 per cent cut is to seek special deals directly with TAB; with TAB agents; or with racing clubs.
TABs say they do not do deals directly. But the pressure will come if a privatised Victorian or other TAB decides to get competitive and offer bigger winnings for big punters. Racing clubs do deals now with big punters. They might add 1 or 2 per cent to the winnings. The Burbidge inquiry found this happening in the ACT, but that it was not illegal. However, it requires the connivance of the TAB which must supply betting details and winnings to the race club so the race club knows precisely how much to top up the big punter’s winnings.
It might seem bizarre that the race club would want to attract successful punters who would take such large sums of money away in winnings.
But it is all about turnover. The race club and TAB get money according to turnover, no matter where it comes from. The additional money going to successful big punters ultimately comes from the pockets of masses of small mug punters whose return rate might drop from, say, an average of 65 per cent to an average of 63 per cent. (The loses are socialised and the profits capitalised, as the saying goes.)
There is so much money at stake — more money is spent on the TAB than Australia’s defence — that even a small part of the 15 per cent take to government is an attractive prize. With competitive pressure between the states, one or more could easily break ranks.
And then there is overseas competition. With the internet, cheap international phone systems and ever more power and cheaper computers, it will not be long before an off-shore operator can offer better dividends on Australian races than the TABs. It will be impossible to trace; it is probably legal and quite safe with new secure internet credit-card trading.
The TABs are not out of the woods yet.