The clubs are screaming. So are the Labor Party, the hotels and the casino. It’s over a new poker-machine law that was passed in the Legislative Assembly this week.
The clubs deserved to be clipped around the ears, but the legislation will pose an unfair (perhaps fatal) burden on small clubs and imposes an unjustifiable burden on political donations, as we shall see.
First to some history. In the 1970s when the ACT did not have pokies, people flocked to the Queanbeyan Leagues Club. Too much money was going across the border so the ACT allowed pokies here. But they were restricted to clubs and later to just six hotels. The casino was not to have them.
ACT clubs boomed and people thought their sport and charity works did also. But the clubs used their poker machine revenues mainly to cross-subsidise food, drink and entertainment and to build bigger and better facilities. Some gave a lot of money to the Labor Party. Membership swelled. Clubs reduced the cost of membership to laughably small levels – you could just pay the membership as you went in and still be ahead. Special classes of membership were created to make sure that the riff-raff off the street could join but not vote. The clubs began to advertise and still do, just like a business seeking patronage. The advertisements carry a hurried, irrelevant message that the advertisement (over the mass media) is “”for the information of members and their invited guests”. Many “”clubs” got so big that any idea of members having a community of interest was a joke. All this time, though, they enjoyed significant tax benefits – both poker-machine tax and ordinary taxes.
Hotels suffered.
By the mid-1990s suspicion grew that the clubs were not dishing out very much of their poker-machine revenue in charity at all. In 1997 the law was changed requiring them to report to the Commissioner for Act Revenue (and later the ACT Gambling and Racing Commission) on exactly how much they gave to charity and sport. About 7 per cent seemed a reasonable aim by the Government (too small, in my view). The clubs attempted to get away with suggesting that donations to political parties (especially Labor) and spending on their own facilities were charitable and sporting. The commission thought it not very sporting at all. It imposed its own categores.
At the end of the 1997-98 financial year, the sordid truth came out. Of $950 million put into machines, only $2.9 million went to real charity and sport, after you took away $6.5 million of pretend charitable donations. Even expressed in relation to the $87 million in net profits, the $2.9 million looked pitiful, especially when you consider that the clubs had been given the monopoly on poker machines precisely so that large sums could be sent to charity.
The clubs were asked to lift their game. And they did slightly. In 1998-99 charitable donations went up to $4.6 million or 5 per cent. But last year, the clubs slipped back. Donations stayed the same but revenues went up, so the percentage going to charity dropped. Moreover, less than a third of clubs were meeting 5 per cent of revenue to charity.
The message was clear. The only way to get clubs to do the right thing was to force them. Hence last week’s law. They have been given three years’ warning, so they can hardly complain.
The law says that unless a club gives 5 per cent to charity and sport (as audited by the commission), they would have to make up any shortfall with a tax direct to the government. It would rise to 6 per cent next year and 7 per cent the year after.
On its face that is a fair cop. Consider this. The six hotels with pokies pay 35 per cent of gross machine revenue in tax as against the clubs’ 23.5 per cent. The clubs surely should have to give 11.5 per cent to charity in addition to their 23.5 per cent tax to have an equivalent community contribution as the hotels.
Indeed, the hotel poker machines are contributing more to the community than the clubs machines. Even when you add the clubs’ pretend charitable donations (those to themselves and their political mates) they are still behind the pubs. Tax and charity of the clubs equals 34.25 per cent. Just the tax of the hotels’ machines equals 35 per cent. On top of that the hotels give a further 6 per cent to charity and sport – once again, more than the clubs.
And bear in mind, the money the Government gets from hotel pokies tax can be spent on what the Government (as community representative) sees fit, whereas the charity and sport donations of the clubs are directed according to how the board of directors of the clubs see fit.
The monopoly on poker machines granted to the clubs is unjustified. As is their concessional rate of tax. If the pubs can give the community more in tax and charity than the clubs, why give the clubs special treatment?
That said there are a couple of things wrong with the new law. It does not recognise “”in kind” donations. It is retrospective and it discriminates against small and new clubs and against clubs which give political donations.
“”In kind” donations are perhaps too easily fudged. Nonetheless they are useful community contributions. The Government needs to make more allowance for them, or the club should find a way of converting them to cash.
The retrospectivity arises because last week’s requirements apply to money that went through poker machines from the beginning of this financial year.
The discrimination is worse. There is a special requirement to match political donations dollar for dollar with extra charitable donations. This is a bit of undergraduate point-scoring against the Labor Party which collects about $800,000 from the Tradesmen’s Union Club and the Labor Club. The Assembly should revisit this one. The charity requirement should be the same for all clubs. If a club gives money to a political party, that, surely, is a separate matter. The important point about political donations is that they should be open. The pokies and Electoral Act reporting conditions are such that we know precisely how much is given by a club to a party.
Small clubs will suffer because they do not have the economies of scale of larger clubs. At present the law does not look at actual net revenue from pokies. Rather it takes gross revenue and deducts 15 per cent to arrive at a net figure and applies it across the board. It then demands 5 per cent of that to be paid to charity. That is irrespective of overall club profitability. About 10 clubs gave nothing to charity and sport last year. They might have had nothing to give. The new arrangement could push them to the wall. Also new clubs did not get the free land that some older clubs got (along withprofitable redevelopment opportunities). They are paying top rent.
It would be unfortunate if the effect of the new law were to result in the bigger clubs getting even bigger by swallowing up the smaller ones. After all, the smaller clubs have a closer attention to the members’ special interest, the succouring of which was the aim of the giving them the poker-machine monopoly in the first place.
It seems to have been an unfulfilled cause.