Hong Kong’s Legislative Council this week passed a bill requiring the Hong Kong Jockey Club (HKJC) to pay an additional HK$2.4 billion (US$306 million) per year for the next five years – and there could be more taxes on the way.
Despite objections from HKJC – which earlier claimed that imposition of the new tax would destroy its business model and prevent further investment into the community – lawmakers ultimately approved the move with the government seeking to alleviate a HK$140 billion (US$17.8 billion) budget shortfall emanating from the COVID-19 pandemic.
“In proposing to levy the SFBD (Special Football Betting Duty), we have taken into consideration a number of factors, including the affordability of the Hong Kong Jockey Club (HKJC) … and the external competition faced by the local football betting business,” said Secretary for Financial Services and the Treasury Christopher Hui, as reported by Hong Kong Free Press.
However, Tommy Cheung Yu-yan, chairman of the Liberal Party and an honorary voting member of the Jockey Club, also suggested that other sports, including basketball, could be subject to similar tax increases in the future.
While HKJC has yet to respond, it had issued a statement in January – shortly after the tax was first proposed – in which it said the proposal represents a “lack of understanding of the competition in the wagering market and the Club’s investment and business” and would “create irreversible damage to Hong Kong by destroying the Club’s longstanding successful business model and Hong Kong’s world status as a leading racing jurisdiction and will jeopardise the public interest of Hong Kong.”
Specifically, The HKJC said raising the betting duty would theoretically raise its taxation to the government from HK$25 billion (US$3.2 billion) to more than HK$31 billion (US$4.0 billion) while reducing revenue before operating costs from HK$15 billion (US$1.91 billion) to HK$9 billion (US$1.15 billion), resulting in zero or negative surplus and preventing the Club from making necessary investments to secure its future and from contributing to the community.
It would also likely lead to some customers looking elsewhere for more competitive prices.
“The Club is the only licensed betting operator in Hong Kong but not the only operator,” it said. “It is facing fierce competition in an uneven playing field from Macau as well as from illegal and offshore bookmakers across the globe. This is because Hong Kong has the highest betting duty rates in the world, ahead of other operators by 15% to 65 %.
“In addition, illegal and offshore bookmakers, who are not subject to regulatory restrictions, provide better odds, a wide range of betting products such as basketball, Formula One, golf and tennis etc, and credit lines. This makes it increasingly difficult for the Club to compete. Any increase in football betting duty will reduce the Club’s competitiveness and drive more Hong Kong people to bet with illegal and offshore bookmakers. Under these circumstances, the government will receive less, not more, tax and duty.”
The HKJC is the single largest tax paying entity in Hong Kong, having returned a record HK$33.6 billion (US$4.3 billion) to the community during the 2021/2022 season.
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