Ainsley Walters, Staff ReporterWHILE Jamaica's newest lottery company, Supreme Ventures Limited (SVL), recently announced hefty year-to-date gross sales of $7 billion, horse racing's turnover has been on the decline this year, shackled by taxation, outdated restrictions, a shrinking betting dollar and an overzealous regulatory body, affected industry players told the Financial Gleaner.
From the established bookmakers to state-owned promoting company Caymanas Track Limited (CTL), the cry has been for government to heed international norms and revise its taxation policies for the industry to effectively compete against modern forms of gaming such as the local lotteries and a growing trend of on-line betting services on overseas sporting events.
Government last year raked in $218m from bookmakers by way of its 11 per cent levy on gross sales. CTL's contribution to the national coffers, from a seven per cent take of the tote dollar, was $190m the previous year.
However, for many years, very little of this money has been re-invested in the sport, not even for infrastructure work, forcing CTL to now seek funding by way of loans on the open market.
"Government is ill-advised on gaming," bookmaker Xavier Chin told The Financial Gleaner recently. "Whoever is giving them advice are historians and not taking into consideration what is happening now with information technology.
"Information technology is opening up everything," said the Track Price Plus Limited managing director, who has been lobbying the Betting Gaming and Lotteries Commission (BGLC) to lift the regulation which prohibits bookmakers from conducting any form of horse racing wagering, overseas included, while local races are on at Caymanas Park.
Chin, who said his company has spent in excess of $40m upgrading an archaic pen and voucher network of betting shops to being almost fully computerised and on-line with the BGLC, believes his sales, approximately $640m last year, would increase by 50-70 per cent if the regulation was lifted.
"That would certainly benefit government and the horse racing industry on a whole," he pointed out. "I can assure anybody, that amount is now going underground to the illegal bookmakers, who are flourishing and paying no taxes."
Confronted with what Chin and other bookmakers term "unfair competition", their betting shops are ordered closed by the BGLC a half-hour before local races start at state-owned Caymanas Park, a regulation intended to ensure CTL corners the betting dollar at the track and its network of Off Track Betting (OTB) parlours.
However, illegal bookmaking has flourished under the system, mainly due to big spenders not wanting their cash to lessen the odds in CTL's tote system. Also, small bettors not in proximity of an OTB parlour often turn to the bookmaking underworld.
"The playing field must be levelled," Chin demanded on behalf of bookmakers, from whose 11 per cent tax four per cent goes towards purses at Caymanas Park and seven to government's coffers.
"We are banned from selling on the races which we help support but at the same time the shops can remain open to sell lottery tickets and phone cards," he pointed out, adding it was time government followed the United Kingdom's lead of replacing the 11 per cent gross sales tax with a gross profit tax in addition to lessening its industry-high seven per cent take from the Caymanas Park tote.
Faced with the flight of bookmakers escaping a restrictive nine per cent tax and relocating to off-shore havens such as Gibraltar and the Isle of Man, the United Kingdom last year relented in favour of a 15 per cent tax on profits, which eventually wooed back the bookies and spurred a tremendous rise in sales.
A UK Treasury web site quoted Stephen Timms, the Treasury Minister responsible for betting duty, as saying the reform, which came into effect Janaury this year "will provide a better deal for punters", which would "help UK bookmakers to compete internationally, while continuing to make their fair contribution to racing and to government revenues".
"The reforms are fair to punters, bookmakers, racing, the taxpayer and will provide the UK with a betting duty system and a competitive environment for bookmakers fit for the 21st century," Timms summarised.
"Basing the tax on gross profits allows bookmakers to offset winnings paid out against stakes received," the Treasury report entitled 'General Betting Duty Abolished' stated. "This reform will remove any incentive for illicit gambling and should help eradicate the illegal untaxed market in betting, which is currently estimated to be worth 500 million pounds per year."
Proving the UK's move spot-on, Coral, a British bookie firm, in May indicated interim core profits - before one-off costs - grew 90 per cent.
In the United States, which doesn't have a bookmaking system but instead straight tote betting, it has been reported that the New York Racing Association as of May 1, 2002, returned an additional US$28m to its customers by way of a reduced takeout with an additional US$36.8m expected to go likewise for the following year.
In short, it has been proven in the world's two biggest racing jurisdictions that whenever government lessens its take from dividend, punters are spurred to bet more with additional money returned as dividends, creating a windfall for the promoter, government and purses for owners, trainers, jockeys, grooms, breeders and other industry-related workers.
Ironically, when faced with a shortfall, and with no help forthcoming from government, CTL was forced to do the short-term and counter-productive opposite last year - increase the minimum stake!
CTL chairman William Chin-See, with his government-owned company already strapped by having to return seven per cent of the betting dollar to the state as taxes, eight to purses and five to OTBs as commission in addition to 70 per cent as dividends, said there is sound reasoning in Chin's arguments regarding bookmakers' closing hours and the effect an extension would have on illegal betting but added that the bookies would also affect his OTBs' "competitive edge" and would probably have to help off-set some of the financial burdens of over-taxed and cash-strapped CTL, which probably earns less than 10c from the betting dollar.
"I believe in what is fair and just and if it is so, so be it," he said, "but there has to be a serious balancing act," the CTL chairman added.
"They are saying their customers aren't our customers, meaning the 'paper bet' man does not want his money in the tote to cut down the odds. If he's closed that leaves Caymanas Park and the illegal man, who he'll prefer to go to.
"I don't believe we'll ever be able to stamp out the illegal man but if we were able to reduce his take, by those suggestions, it would be good but there's another side. CTL has the burdens of the industry and without the promoter there would be no horse racing.
"Even though we are government-owned, CTL faces every expense possible, including GCT, and if bookies are allowed to remain open all day they could probably be asked to pick up a big part of our expenses. They would have to make a bigger contribution to purses, a much bigger contribution to the rights fee.
"We would have to look at the numbers and see how they would pan out to create a fair situation. All the details would have to be looked at because you can't kill the promoting company which is already fighting for survival," Chin-See added, defending his OTBs, which pull in nearly 80 per cent of CTL's sales.
Entrepreneur Howard Hamilton, a former CTL chairman with bookmaking investments, was actively pursuing having bookies remain open while local races were on during his short-lived stint.
However, a bust-up between Hamilton and his board members over their sacking of chief executive officer Rose Campbell led to Finance Minister Omar Davies scrapping the board. That effectively was the end of Hamilton's public lobby until he recently renewed his efforts from behind the pen twice weekly in his 'Horse Sense' column in the Daily Gleaner.
One aspect of Hamilton's proposal then was that tax derived from bookmakers' sales during the extended opening hours be channeled directly into Caymanas Park and not government's pockets, ensuring the promoting company, 43-year-old racing plant and professional bodies benefit from the new source of income.
Responding to Chin-See's cry, Hamilton has suggested what CTL should do is insist more of the bookies' 11 per cent levy be returned to the sport instead of just four per cent.
"The bookmakers are already over-taxed," he said. "What is going to CTL now from the bookies' levy is a disgrace and things will get worse because with the Prime Ministers' recent announcement of incentives on horse importation, there's going to be serious pressure for increased purses."
Responding to just one of the problems facing the industry, Prime Minister P.J. Patterson last month announced a five-year waiver on import duties and GCT on horses entering the country. However, to industry investors, that was merely a carrot dangling in front of an unwilling nag.
"Even though the minister of finance believes there's an expanded lottery market, a common law of physics is that matter cannot be created nor destroyed. While one grows, somebody else suffers," Hamilton said, referring to the effects of a booming Cash Pot and Lucky Five lottery market on the betting dollar and racing industry. Hamilton, similar to Chin, believes government should "examine what the UK and USA have done and see how best we can adapt it".
Meanwhile, industry concensus is that a reduction in government's take from the CTL tote along with a revision of bookmakers' regulations and tax structure, would lead to growth but won't be possible if the horse racing dollar is expected to support the national budget and forsake its source.
