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Tabcorp and Tatts May Sue the Victorian Government over Levy

Wed, May 8, 2:42am by Kevin Pitstock

Tatts GroupConcerned by more than $82 million in levies on their poker machine businesses, Tatts and Tabcorp are considering new legal action against the government of Victoria. On August 25, 2012, the two companies filed a $1.2 billion lawsuit against the Victorian government for ending their 20 year duopoly over gaming machines. The 2012 lawsuit and the 2013 levies are linked through the Health Benefit Levy.

Health Benefit Levy

The Health Benefit Levy was introduced in July 2000 by the Victorian government for the sake of funding charities and hospitals. The levy applied to pokies operated by the duopoly Tatts and Tabcorp had over poker machines in the state of Victoria. The previous Labour government of Victoria ended the duopoly on August 15, 2012, handing over control of the poker machines to local clubs and pubs.

The companies involved claim when their licenses to operate gaming machines outside of Melbourne’s Crown casino expired on August 15, their gaming operations could only last 46 days a year. In that time, the companies claim they generated earnings “before interest, tax and depreciation” of about $29 million. If true, this would be far short of the levy imposed.

Victoria’s State Budget Due

Despite allowing the collection of revenues for less than two-thirds of the year, the government wants payment of the levy for a full year. With Victoria’s state budget about to be delivered, Victorian Treasurer Michael O’Brien announced the levies. Tatts was sent a letter asking for $42.6 million, while Tabcorp was sent a letter asking or $42 million. In the case of Tabcorp, the racing industry of Victoria is expected to pay 25% of the levy, since the Tabcorp machines are part of a joint venture with the racing industry in the state.

A spokeswoman for the government said the Health Benefit Levy law had no provisions for pro-rating the payments. Given that no exceptions were written into the language of the law, the treasury has no choice but to ask for a full year of payments. “The Health Benefit Levy is applied consistent with the Gambling Regulation Act, and has been levied in the same way for more than a decade,” said the spokeswoman.

Tatts and Tabcorp do not see it that way. They see the levies as punitive and unreasonable. Tabcorp sued Victoria for $686.83 million ten days after the pokies license ended in August 2012, while Tatts sued for $490 million. At the time, government officials claimed they would fight the lawsuits vigorously, pointing out any damages would ultimately be paid by the citizen of Victoria.

Tatts and Tabcorp Seek Redress

The two gaming companies seek to open a dialogue with the government over the issue, saying they would prefer to avoid another legal conflict. If no dialogue is forthcoming, a lawsuit may be their own recourse to “protect their legal position”.

In separate statements to the Australian Securities Exchange, the companies estimated the levies would lower profits for the year by $24.3 million for Tatts and $18 million for Tabcorp. Coming on the heels of losing the duopoly revenues, the two companies will argue they face financial harm from the levies.

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