Once again, we see an unseemly barter between states to give tax breaks to industry to keep or attract economic activity. This time Victoria seems likely to match NSW’s reduction in the gambling tax for high rollers at its Sydney Star Casino. It is bad enough when states offer tax holidays to attract manufacturing and service industries, but a barter over attracting high-roller gamblers is worse.
The reduction in the tax is likely to come about after Kerry Packer’s Consolidated Press Holdings revealed a list of claims on the Victorian Government and Victoria’s Crown Casino if his investment in the casino is to go ahead. Mr Packer has an option to buy half of Crown Casino for $425 million. At the time he put that option it looked like a rescue for Crown which had had a run of poor financial performances, some of which had been caused by successful high-roller gamblers. The trouble for Victorian Premier Jeff Kennett is that Crown employs 2000 people and attracts a large amount of tourism into Victoria. Mr Kennett gambled on the casino being capable of sustaining the employment, tourism and meeting its obligation to build substantial hotel facilities and a theatre. Mr Packer wants the obligation (which at present is enforceable by large contract penalties) to build a second hotel complex and the theatre to be removed. He also wants restrictions on table-to-machine ratios to be removed and an extension to the exclusive licence for Melbourne and Victoria.
Mr Kennett is unlikely to meet all the demands. He does not want to be seen to be in the pocket of Mr Packer or be seen to be giving even more public concessions to Crown’s chairman, Lloyd Williams. But the claims were probably only ambit anyway, despite the protestations to the contrary by Crown.
Some of the pressure is off Mr Kennett because since the Packer bid, Crown’s finances have improved beyond expectation. In the September quarter it made a net profit for the first time since moving to its permanent site. But the main reason for the profit is the domestic market. The high-roller market was, in the words of Crown “”a little soft”.
This is quite contrary to the whole justification for Crown casino. The theory was it would attract an international clientele to the casino, the city and the state, who in turn would provide economic benefit. The international clientele are not such suckers. And the Asian crisis has turned many away. Gambling is a fickle business and the Government was foolish to invest such hopes for it. The sad fact is that the casino is merely leeching money from the domestic market, mostly from people who cannot afford it.
The present appeal to reduce the casino’s public building commitment and to reduce the tax on the very international high-rollers who were to bring such benefits to the state is a bit thick. Taxation is supposed to take from the rich to help the poor. This casino seems to take from the poor to help the rich.
One monopoly casino in Australia was bound to make money and raise tax revenue. Now every state and territory have one or more, they are no longer a cash cow and even what small revenue benefits they offer are under threat by this absurd interstate competition to see who can offer lowest tax rates and greatest concessions.
Perhaps Treasurer Peter Costello’s Competition Commission inquiry can expose the folly and ensure it does not infect Commonwealth finances. And the sates might wean themselves off the gambling cargo cult and concentrate on more difficult but more fruitful industry development.