Just weeks before a significant increase in the tax it pays on gaming revenues is due to kick in, Australia’s Star Entertainment Group is still negotiating with the NSW state government over a possible deferral of the tax hike.
According to a report from the Australian Financial Review (AFR), other options being explored include rebates for future investment into building upgrades with Star desperate to ease the financial pressure that has already seen the company slash 500 jobs following recent regulatory actions taken against it.
First mooted by the NSW Labor Party when it was in opposition late last year, the increase would see the tax levied on electronic gaming machines increased from a flat rate of 32% to more than 60% – putting it well above the 37.5% rate paid by NSW clubs. Although marketed as a tax on NSW casinos, Star’s Sydney rival Crown Sydney does not have any poker machines meaning the EGM tax is essentially a tax on The Star Sydney alone.
United Workers Union boss Dario Mujkic has previously claimed the tax hike would cost Star around US$100 million a year.
While the AFR reports that the Labor Party, which won government at the March state election, was intent on pushing the tax through, its own Treasurer Daniel Moohkey has described the plan as not being “properly developed” and is said to be looking for alternatives.
“The advice I have received has led me to conclude that the policy wasn’t properly developed,” Mookhey is quoted as saying. “And equally, Star wasn’t given the opportunity to explain what the impact would be on their business,”
The AFR also cites Treasury briefings which note that Star would be taxed at a higher rate than Victoria’s Crown Melbourne under the revised tax system. The briefings state, “No consultation was undertaken with the casinos prior to announcement of the new duty rates.”
Star has already slashed 500 jobs from its workhorse since April while canceling executive bonuses and freezing the salaries of non-EBA (enterprise bargaining agreement) employees due to what it calls a significant deterioration of operating conditions at its Sydney and Gold Coast casinos – including the inability to offer complimentary services to customers in private gaming areas under new regulatory restrictions. It is also undertaking a strategic review of possible structural alternatives to further increase value for shareholders.
The company has been hit by AU$200 million (US$134 million) in fines by regulators in NSW and Queensland and faces further punishment from AML watchdog AUSTRAC for failings uncovered during the NSW Bell inquiry.
