The racing season in Hong Kong ended over the weekend, and after another year of decreasing turnover, officials with the Hong Kong Jockey Club wasted no time in campaigning for a reduction in betting duty.
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"The current betting duty system has been in use for over 30 years. It is outdated and needs to be reviewed."
- Lawrence Wong
Hong Kong Jockey Club
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Over the last five years, the HKJC has seen a steady decline in betting turnover and race attendance as competition from online bookmakers and other illegal betting operations continues to grow.
Turnover this season sunk to $8 billion, a 9 percent decrease over last year's figure of more than $9 billion. The average attendance at races also dropped nearly 6 percent, to only 26,300 per race.
The news was doubly bad for the government, as it lost $94 million from its take of the betting tax. The drop reflected almost an 8 percent decrease in its cut from the previous year.
HKJC chief executive Lawrence Wong said at his end-of-the-season address that the club has seen a decline in turnover for a number of reasons, but he cited online gambling as the No. 1 factor.
"Illegal and offshore betting has led to a substantial drop in turnover as the club is in an unfavorable position against unlicensed bookmakers who pay no tax and have no operating costs," Wong explained.
He also attributed the decrease in turnover to the weak economy in recent years; customers' reduced means; the club's launch of football betting; and changes in consumers' lifestyles and preferences.
Wong is encouraging the government to reconsider the existing average tax of 13.5 percent on every bet to enable the Jockey Club to compete with "illegal" bookmakers,
"The current betting duty system has been in use for over 30 years," Wong said. "It is outdated and needs to be reviewed."
In advocating the reform, Wong drew parallels to the betting structure in the United Kingdom. British authorities switched to a 15 percent tax on gross profits in 2001 and saw its racing turnover increase by nearly 80 percent. Revenue received by the Treasury Department consequently skyrocketed, something Wong said needs to happen in Hong Kong or else many programs will be in jeopardy.
Going to a gross-profit levy structure similar to what is in place in England would be a win-win situation for everyone involved, Wong said. The new plan would be a positive for the government, the public, the Jockey Club and for charitable organizations that rely on betting duty revenue, he added.
He'd also like to see a system with a lower or abolished fixed duty and the betting duty levied at a percentage on gross profits.
"Such a move would enhance the club's competitiveness against illegal bookmakers and offshore operators,'' Wong said. "Higher dividends would be paid to customers, boosting turnover, treasury income and charity donations to benefit the Hong Kong public.''
Not only has Hong Kong not lowered its betting duty, the rates have actually gone up over the last 30 years.
"Average betting duty has grown from 8.81 percent in 1974 to the current 13.5 percent,” Wong said.
"That figure, he said, "is one of the highest takeout rates in the world."
To make matters worse for the HKJC, while betting duty has gone up over that period, its commission has gone down.
"The club's commission rate has been reduced from 9.12 percent to 5.4 percent, one of the lowest worldwide," he said. "Despite these considerable disadvantages, the club remains the largest single contributor of tax income in Hong Kong.''
Conspicuously absent from Wong's remarks was any mention of football betting turnover. Many industry analysts peg turnover from football betting that the club runs, mainly on English Premiere League action, to be more than $5 billion.
That action would certainly offset some of the losses suffered by the HKJC over the last couple of years, but Wong instead focused on the racing turnover. He said that figures for the club's football betting business would emerge in July.
Wong also appealed to the government for greater flexibility to allow the club more scope to further promote racing.