New Zealand Will See Offshore Gambling Operators Taxed Through a New Legal Bill

In iGaming by on August 3, 2017

The government of New Zealand announced earlier this week on Tuesday, the 1st of August 2017, that they will be unveiling a new legislation that is aimed at amending the country’s Racing Act. The legislation has been titled The Racing Amendment Bill. The piece of legislation will look to introduce a usage fee for companies that are looking to access information about betting events in the country. The bill will also see a point of consumption tax added to racing and sporting bets that are offered to New Zealanders by these offshore operators.

The Recommendation from the Offshore Racing and Sports Betting Working Group

The Offshore Racing and Sports Betting Working Group is an independent working group that was commissioned by New Zealand’s Minister for Racing, Nathan Guy. Guy was also the person responsible for introducing the legislative bill in question. His mission was to aid the country’s racing and sports businesses by charging a fee to offshore bookmaker that operate in the region.

Countries in the area have recently been bombarded with an increasing number of foreign gambling companies that are looking to take a slice of the market. The governments had incentivised global companies to expand into the region via tax cuts and other benefits.

Guy first revealed the recommendations for the bill at New Zealand Racing Board’s (NZRB) Annual General Meeting in November 2015. Minister Guy revealed the findings of the Offshore Betting Working Group and outlined a number of recommendations designed to combat the impact of offshore betting on racing and sports in the country.

The Minister had established the Offshore Betting Working Group in April of 2015. This was done to try and shed some light on the issue surrounding offshore companies and their impact in the country. The group also included the CEO of NZRB, John Allen, the chair of Sport New Zealand, Sir Paul Collins, the thoroughbred nominee from NZRB, Greg McCarthy, and two experienced managers from the Department of Internal Affairs, Raj Krishnan and Stephen Reilly.

The Offshore Racing and Sports Betting Working Group was initially tasked with studying the statistics surrounding these off shore companies. They found that an increasing number of New Zealanders were engaging in offshore online racing and sports betting. They were also asked to look at how these gambling companies use race and sporting information.

The working group looked at a range of data sources and quickly summarised that government’s losses. The results showed that ach year they lost around NZD $58 million of gross betting profits and almost NZD $518 million in turnover to offshore gambling companies. This meant that while the citizens were in fact spending a large portion of their pay check on these platforms, neither the New Zealand racing nor sporting sectors was seeing any of the benefits. Furthermore, the country’s government was not making any money from these businesses either. Therefore, the practice was in no way aiding the country’s economy. In addition to that, it was estimated that Australian corporate bookmakers were freely making a turnover of another NZD $300 million on racing events from New Zealand.

New Zealand does have their own TAB services. However, the working group determined a range of factors that cause residents to bet with offshore gambling operators instead. These include access a broader range of products, and a greater mix of both service and pricing compared to the local alternative.

The group made a number of suggestions to try and help the New Zealand TAB compete better with their offshore rivals. Further recommendations were also made on how they could protect the integrity of the country’s racing industry. Suggestions were also made on how they could protect the safety of their customers.
Minister Guy reiterated that solving the leakage problem was complicated. He said that it was more complex than simply blocking access of overseas betting websites.

Firstly, the working group had recommended the New Zealand TAB could sharpen their competitive edge. This could be done by improving the products and services that are available to the customer through them. They also mentioned that the Racing Act of 2003 needed to be altered. This was to allow the country’s TAB the opportunity to offer a broader and more competitive range of betting products to their players.

The working group also recommended introducing an Offshore Bookmaker Fee through central legislation. This would mean that the government would require an “extra- territorial focus and a credible enforcement regime.” With this, offshore gambling operators would have to pay a fee whenever they wanted to accept a bet on racing and sporting events taking place in the country. On top of that a fee would also be applicable when the operators wanted to accept a bet from players in New Zealand.

It was estimated that introducing fees on these bets would initially raise up to NZD $16 million a year in revenue for the government. It was detailed that some of the money could then be channelled towards the racing and sports sectors of the country. Part of the money could also be contributed towards agencies that deal with problem gambling. These organisations provide support for players with gambling addiction. These services regularly incur an ever increasing cost on the government. Not to mention, some of the funds could also be used towards measures that will help maintain the integrity of the country’s racing and sports codes.

A number of the working group’s recommendations were related to in- race betting; betting on a wider range of sport and prediction events. These were not to be dealt in the same bill but under different legislative measures that were to be rolled out at a different time.

Glenda Hughes the Chair for the NZRB agreed with Guy and the group’s findings. She said that offshore bookies had been “freeloading” on quality New Zealand sports and racing products for a long time.

The Racing Amendment Bill

The Racing Amendment Bill that was introduced this week reflected these recommendations from the Offshore Racing and Sports Betting Working Group.

To start, the proposed amendments in the bill would subject offshore betting operators a usage fee as well as a point of consumption tax. The tax will only apply to companies that make an annual revenue in excess of NZD $60,000 from their New Zealand operations.

The bill also stated that all operators that are using New Zealand racing and sporting information for betting purposes will be required to seek the prior approval of the Department of Internal Affairs (DIA). They will have to sign an agreement with sports governing bodies with respect to the usage of the information that they collect from sports and racing events in New Zealand that they ultimately use to design bets for their punters. The DIA will also be authorised to issue penalties to any of the operators that fail to comply with these new rules. Some companies will be granted exemptions on the basis of having previously entered into commercial agreements with sports governing bodies on similar terms to the proposed fees. The DIA will be responsible for issuing and monitoring these exemptions as well.

The fees for the offshore operators are yet to be decided. If the bill passes into law, New Zealand’s minister for Racing will be responsible for setting up these charges. However, it has already been established that the money will be paid to the country’s racing and sporting organisations. The funds will primarily be used to support the long- term viability of the country’s sporting and racing sector. Additionally, the money will be used to finance harm minimisation programmes. These will be targeted towards programs that are aimed at people suffering from problem gambling issues.

Other amendments in the bill include the legalisation of in- race betting. This only applies to the outcome of a race. Lastly, the bill will also authorise the New Zealand Racing Board to enter into agreements with Sport and Recreation New Zealand to represent sports without a qualifying national governing body for sports betting purposes.