Ben Eltham | Transparency Please! Why the Tax Breaks for Pokies Clubs?


First published in Crikey here

Has there ever been a more self-serving public campaign than the one being mounted by Clubs Australia?

Clubs have long justified their gaming activities due to their value to the community. As Clubs Australia’s website says on its home page: “Clubs are not-for-profit community-based organisations whose central activity is to provide infrastructure and services for the community.”

And if there’s one thing that hard-pressed Labor parliamentarians have been stressing, it is that they value the important services and benefits to their local communities that clubs provide.

Attorney-General Robert McClelland was spreading the message in his local electorate this week. “Clubs are a big employer and play an important role in the St George area as they do in many communities,” McClelland apparently told the St George and Sutherland Shire Leader. “I am a big supporter of clubs and I also support action to deal with problem gambling.”

McClelland even argued that clubs contribute to national security. “In my national security role, I think the support clubs give to sport is great for the community,” he told the Shire Leader’s Murray Trembath. “The Dragons team, for instance, brings together residents from different backgrounds into one cohesive mix.”

McClelland has since clarified his support for the government’s mandatory pre-commitment policy, but there are plenty of backbenchers in marginal electorates in NSW and Queensland feeling the heat.

But how seriously should we take the argument about the value of clubs to local communities? Not very. Clubs may have a legal structure as not-for-profit entities, but even a cursory glance at their operating activities and their financial statements shows they are essentially gaming operations with a philanthropic sideline.

A glance at the 2010 annual report of one of Australia’s largest clubs, the Panthers Group, shows how hollow the argument about community benefits really is. Panthers raked in $91.7 million from gaming in 2010, or 60% of its operating revenue. Against this, the amount Panthers spent back in its local community was relatively small: $617,000 in junior development, $2.9 million in member promotions, $1.4 million in donations, $698,000 in sponsorship, $2.4 million in artists and entertainment expenses for its members and $2.2 million in “other promotions”. Panthers also paid out $47 million in wages and employment benefits and paid the NSW government $28 million in poker machine tax. All told, the amount that Panthers could reasonably be said to be “returning to the community” still adds up to less than the amount it extracts from gamblers.

Or examine the Rooty Hill RSL, also in Sydney’s western suburbs. Its 2010 annual report features a prominent drop quote from none other than Donald Trump: “As long as you’re going to be thinking anyway, think big.” The club is certainly thinking big when it comes to poker machines: it enjoys “Australia’s largest non-casino installation of electronic gaming machines” with an amazing 726 gaming machine licences. Poker machines raked in $43.2 million of the club’s total operating revenue of $64.7 million — a neat two-thirds of its revenue. Against this, the club spent $5.7 million on entertainment, marketing and promotional costs, $1.8 million on members amenities and a miserly $601,000 on donations. $13.1 million was paid out in poker machine taxes and wages and staff costs accounted for $18.6 million, but the club was still able to record a healthy operating surplus of $5.2 million for its 2010 financial year.

For some clubs, the equation is even more imbalanced. In McClelland’s own electorate, poker machine revenue accounts for an amazing 81% of the St George Leagues Club’s total operating revenue of $39 million. Only $3.3 million found its way back to what the club calls “football clubs and community development and support” expenditure.

Clubs have of course long enjoyed support from local sporting communities. But these days the gambling seems to be taking over the sport. Perhaps that’s because gambling represents an ever-increasing share of many football club revenues. If you watch football in 2011, it’s hard to escape the hard sell pushed by the gaming and betting industry. The AFL club St Kilda  is sponsored by Centrebet to the tune of millions (how much is not disclosed), while Hawthorn makes $4.6 million a year, or about 20% of its revenue, from pokies — only $300,000 less than it makes from its match day receipts.

The pokies push by big sporting clubs is nothing if not brazen. Fairfax’s Phil Lutton has a fine piece of long-form reportage in the Brisbane Times today about the Brisbane Lions’ new social club, called LIONS@Springwood, located in Brisbane’s southern mortgage belt of Logan. It’s an elegant exploration of the reality behind the debate about poker machines and clubs. “It’s exceedingly clear what the owners see as the biggest selling point,” he wrote. “As you drive towards the car park, the signs declare you are entering a promised land of ‘200 pokies’. Just in case you missed it, the message is repeated in bold lettering on the club’s facade.”

Let’s remind ourselves that the Productivity Commission has already examined the beneficial aspects of gambling in clubs in some detail. An entire chapter of the 2010 gambling inquiry report is devoted to assessing them. The Productivity Commission found the “claimed benefits of gambling revenue on sporting activities and volunteering do not appear strong” and that “the [gross] value of social contributions by clubs is likely to be significantly less than the support governments provides to clubs through tax and other concessions”. In other words: far from clubs subsidising the community, the rest of the community is subsidising clubs

It’s true that clubs do spend considerable sums on sporting and recreation facilities in local communities. But are they necessarily the best organisations to perform this community service? As the Productivity Commission notes: “Even if it were accepted that clubs might have superior local knowledge about where to spend money for sport and recreation, the conventional government outsourcing model when hundreds of millions of dollars were at stake would involve appropriate budgetary controls, public scrutiny and transparency.”

The Rooty Hill RSL featured in the 2010 election campaign with a leader’s forum in which citizens were able to ask questions of Julia Gillard and Tony Abbott, but perhaps its time our nation’s leaders started to ask some hard questions of the clubs industry

First and foremost among these should be this: why should clubs that are essentially medium-sized suburban casinos continue to pay no company tax as “not-for-profit” entities, and their substantial tax concessions on gaming taxes compared to commercial bars and hotels?

The clubs lobby has opened up a broad front in its assault on government policy. Perhaps its time the government and the community demanded some extra transparency and scrutiny from clubs themselves, in the form of an inquiry into whether large clubs with hundreds of poker machines should be stripped of their tax-exempt status.

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