Betfair Proposes a Taxation Scheme for P2P in Tasmania

1 August 2005

The world's leading online betting exchange says it's willing to give 35 percent of its gross revenues for racing betting to the government and the racing industry of Tasmania if it is granted a license to operate there.

U.K.-based Betfair came forward with a proposed scheme last week calling for a 20 percent levy on all Australian racing events and a 15 percent tax on all Australasian racing and sporting events (before GST, for which Betfair will be responsible). Both the tax and the levy would be applied to gross revenues.

The company also proposes an upfront fee of $5 million and has guaranteed that funding to the racing industry will grow in line with inflation.

Betfair has been negotiating with regulators from Tasmania for several weeks, and industry leaders and legislators are split on last week's proposal.

Tasmanian Premier Paul Lennon said he's behind Betfair and hopes racing officials and policymakers will support the plan.

Harness Racing Tasmania chairman John Hammond said on Friday that he also supports the move and is confident the plan could create more revenue for the industry.

Senior Betfair officials, including founder Edward Wray, met with Hammond and the HRT board this week, and Hammond said he was "very impressed" with the group's presentation.

"Our board has not taken an official position, but I was amazed by their technology and professionalism," he said. "I am still waiting to see the bottom of line of what they can offer the industry, but I can see it has the potential to be a good thing for Tasmania."

Betfair spokesman Andrew Twaits said that based on current levels of wagering on Australian events, exchange betting would bring in millions more dollars to the racing industry each year, but there are still plenty who aren't convinced that legalized exchange betting is a good idea.

Tasmania's thoroughbred industry, for example, remains adamantly opposed to Betfair, or any exchange, operating in the state, and chief among the opponents is Tasmanian Turf Club Chairman Rod Thirkell-Johnston.

Hammond has nevertheless urged Thirkell-Johnston to reconsider his stance.

"It seems to me Rod is just pushing the national line of the Australian Racing Board, rather than putting Tasmania first," Hammond said. "This is all about finding a way to grow our industry, to find another stream of income. At the moment I can't see any growth out of just sticking with our TAB system. This is all about what's best for the Tasmanian racing industry and, unfortunately, I think some people are wearing too many hats instead of just putting their own state first."

Hammond also encouraged officials with Harness Racing Victoria (HRV) and Australia's other leading harness racing bodies, to "keep an open mind" on Betfair and urged fellow industry leaders to meet with the company as he did.

HRV chief executive John Anderson said that won't happen.

"We would never even entertain the thought of meeting and talking to Betfair," Anderson said. "Frankly, I am staggered by John Hammond's personal view on the whole issue."

Lennon, meanwhile, said that any group that won't even talk to Betfair, is doing a disservice to its members.

"There are strong financial reasons for initially looking at this," Lennon said. "Understandably the industry also wants reassurance on the probity and integrity issues and the correspondence goes into those matters. This is about us trying to find a way to get consistent and growing revenue streams to the Tasmanian racing industry."

Sue Smith, a member of the Tasmanian Legislative Council, isn't ready to throw her support behind Betfair either.

"It is one thing to offer the state money but we've got to look at the potential impact on the community," she said. "It's hard to put a cost on gambling problems."

Betfair's CFO Steps Down

In other Betfair news, the company on Friday announced the resignation of its CFO, Owen O'Donnell, who will complete his duties Aug. 31.

Observers have interpreted the move as a means of getting a CFO on board who has more experience with initial public offerings, although the company didn't state whether this was the case. The company's plans call for a float in the first quarter of 2006.

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