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Sep 27, 2011

Transparency please! Why the tax breaks for pokies clubs?

Has there ever been a more self-serving public campaign than the one being mounted by Clubs Australia? It's time for a closer look at the alleged benefits of clubs to the Australian community.

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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41 comments

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41 thoughts on “Transparency please! Why the tax breaks for pokies clubs?

  1. SusieQ

    Excellent article about the ‘footy tax’. I love my footy as much as the next person, but Eddie kicked out of bounds on the full with this one. The clubs have become too reliant on the revenue stream from gambling, which is very sad. For all the people able to set a limit, there are many who can’t.
    I hope to see more stories like this.

  2. Dean Moriarty's Ghost

    It’s not just the big clubs like Panthers and Rooty Hill RSL that are self serving in their campaign against pre-commitment.

    As one of a small group of volunteers, I help run a very small bush cricket club serving a community of about 500 people. We struggle at times to field a side, struggle to maintain financial viability and struggle to maintain our ground to a decent standard. For all the obstacles, we achieve these things and love what we do. We would be among the last people to knock back a grant or donation from a Clubs NSW member to help things along.

    So it has been with some incredulity that we’ve followed Clubs Australia’s campaign, noting in particular the claim that their members provide what would be by our standards; rivers of gold to local sporting clubs.

    One of the bigger clubs in our area is the Merimbula RSL Club who helpfully publish their financial statements on their website. They also helpfully provide banners and other links to the Clubs NSW anti pre-commitment campaign.

    According to Merimbula RSL’s 2010 financial statement, the club’s revenue was $10.1 million. Of this, a tad over $5 million was revenue from pokies. Of this, $2.45 million was pre-tax profit. And what does the financial statement say they gave to the local community by way of grants and donations which are so reliant on pokie revenues? Nothing!

  3. Peter Ormonde

    Nice piece Ben.

    The clubs in NSW feed a legion of seriously overpaid executives – not all of them – but the huge operations. And feed a lot more besides given the murky depths from which poker machines originate. Few of these blokes would ever get a position in the real world but rely on parish pump politics and their mates to stay in their lucrative sinecures. And they know it.
    But they also can claim to have a huge political clout and the challenge will be a major one for the sweaty-palmers in the Government.
    It is a pity that the proposed remedy is so complex and ponderous. A nice simple reduction in the number and availability of pokies with time limits for sessions to one hour a night might have done much of the job I suspect.
    They still would have howled of course – they always would – but it would be a simple remedy for a problem that everyone recognises in their communities.
    The Government needs some hard-hitting personal story ads to counter this self-interested campaign. And quickly.

  4. mg57

    I am heartily sick of the unsubstantiated claims that these big clubs “give back to the community”. Rubbish! I’ve been involved in two local sporting clubs in my area for 15 years, one a soccer club and the other a baseball club, and for years we sought assistance from a couple of local clubs. There were major strings attached and the best they would do was around $500 per year if we promoted them to our members and jumped through a number of other hoops.
    While I’m sure there’s some level of support out there (usually required by their charter and NFP status), as the article points out, this is a minuscule proportion of what these clubs earn from gambling. It’s about time that mainstream journos out there started asking the hard questions of these guys who are screaming about attempts to put a lid on the scourge of gambling that they promote.

  5. SusieQ

    More hardhitting stories and, as Peter Ormonde has said, some stories about those who have suffered with pokies addictions would be helpful (could I be extra cynical and say how about someone who lost all their money at one of the more prominent clubs).

  6. oggy

    To profit from the abject misery of the partners and children of the ‘problem’ gamblers is abominable,if this is what it takes for these Clubs to survive then I would rather they disappear.The total cost to the community of disintegrating families,social welfare commitments,medical interventions, antisocial/criminal acts all need to be factored in to the overall equation on the net negative impact to our community , of this particular gambling mode so the debate is rational. Maybe the Media can get of their fat ar.es and supply some meaningful figures to this issue,Crikey excepted of course as this article attempts to do.

  7. Mark Lucas

    As president of inner-western Sydney’s favourite pokie-free bowlo, Petersham Bowling Club, I can report that we’re painfully aware of the politics of this. As a true community club we are run by a board of volunteers who give their time freely & with enthusiasm. We are dedicated to preserving the open space & community amenity (the community took over in the first place in order to oust developers), & in 5 years or so, have turned an ailing club into a thriving community asset. We have a strong commitment to reducing our environmental footprint & we are also engaged in cementing our relationships with local sporting clubs based not on gambling income, but on shared enthusiasm & maintaining free access to the open space & other club facilities.

    That said- as little as a year or so ago when things were still looking very tough indeed, we soon found out where we stood in the eyes of the “peak industry body” & the traditional club world. We were having difficulty making ends meet but, despite being a small, well managed & largely self-sufficient club & carrying minimal debt, – it was made pretty clear to us that should we attempt to seek help from other local clubs we would be promptly swallowed up &, in time, redeveloped in order to improve their amenities. There was certainly no money available in the kitty to help support a genuine community asset.

    I’m therefore pleased to advise that we are, for the first time since we became pokie-free, quietly in the black at the end of the traditionally challenging winter months (largely on the back of an increasingly successful live music program). There’s still a tough road ahead but we don’t need to bleed the community to survive & we can give without taking. Time for a new business model folks- it can be done. http://www.thepbc.org.au

  8. Mike M

    Not every club with pokies is a Taj Mahal…..there are lots that are very small and for which essentially all of their pokie money goes straight back into it’s sports teams. Please don’t confuse the big clubs with their hundreds of machines with the local footy, sailing, bowls clubs etc with just a handful…they are the ones that nobody is giving any thought to and which are least able to pay for the costs of the proposed changes. Their loss will be felt the most.

  9. Daniel

    Not every drug dealer is Tony Montana, either.

  10. shepherdmarilyn

    It sure is self serving, the clubs brazenly state they love ripping off the punters.

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