Pokie firms threaten to sue over levy
The tax demand comes on the eve of the state's budget and as the government searches for more funding to cover revenue shortfalls and rising costs.
Tabcorp and Tatts told the stock exchange on Monday that Victorian Treasurer Michael O'Brien told the companies he had determined they must pay a health benefit levy of $42 million and $42.6 million respectively for the past financial year.
In separate press releases, Tabcorp and Tatts argued that the levy was being demanded despite, as a result of recent changes to pokies legislation in Victoria, their ownership of the machines was for only 46 days. The levy should be imposed on a pro-rata basis, they argued.
"This defies any test of common sense," Tatts chief executive Robbie Cooke said. "We have had no conversation with government. First we knew that they were going to levy this amount was the letter in the mail this morning."
It was not common sense that the company should be charged a levy for 365 days when it had the business for only 46 days, he said.
In a statement to the ASX, Tatts said it strongly disputed the "reasonableness of the determination" and its "legal sustainability".
"The levy has not been applied pro rata, and it does not reflect that Tabcorp ceased to operate gaming machines on August 15, 2012 when its gaming licence expired," Tabcorp said.
The companies said the levy was contrary to expectations and they were considering legal action to defend their business and shareholders from the tax take.
"We are not a company that relishes being embroiled in litigation but, at the end of the day, if we have to go down that road to protect our shareholders' interests we will," Mr Cooke said.
He said the government had given Tabcorp and Tatts an indemnity last year against new taxes, when it negotiated the new pokies framework, and they would expect that indemnity to be honoured.
In Tatts' case, it had booked pre-tax earnings of $29 million from its pokies business in 2012-13, which is much less than the levy.
Tabcorp had allocated a provision of $3.7 million in its accounts towards its levy bill, while Tatts had booked a provision of $7 million.
Tabcorp's bill will be slightly less than Tatts' because it operated some poker machines under a joint venture with Racing Victoria, which will pay some of the bill.
The levy is applied to every electronic gaming machine operated by Tabcorp and Tatts.
A spokeswoman for the Victorian Treasurer did not return calls.
Frequently Asked Questions about this Article…
The Victorian Treasurer, Michael O'Brien, has determined that Tabcorp must pay about A$42 million and Tatts about A$42.6 million in a health benefit (pokies) levy for the 2012–13 year — roughly A$85 million in total.
Both companies say the levy ignores recent changes to Victorian pokies laws that meant they only owned the gaming machines for 46 days of the 2012–13 year. They argue the levy should be applied on a pro‑rata basis and say charging them for 365 days when they only held the business for 46 days is unreasonable.
Both companies have said they are considering legal action. They told the ASX they strongly dispute the 'reasonableness' and 'legal sustainability' of the determination and that they will pursue litigation if necessary to protect their businesses and shareholders.
Tabcorp has allocated a provision of A$3.7 million in its accounts toward the levy, while Tatts has booked a A$7 million provision. The article also notes that Tatts reported A$29 million of pre‑tax earnings from its pokies business in 2012–13 — which is much less than the levy being demanded.
The levy is applied to every electronic gaming machine operated by Tabcorp and Tatts. Tabcorp's bill will be slightly smaller because it operates some poker machines under a joint venture with Racing Victoria, which will pay part of that bill.
Tatts' chief executive, Robbie Cooke, said the first they knew of the levy amount was the letter in the mail; he said they had had no conversation with government. The companies also said the government had given them an indemnity last year when negotiating the new pokies framework, which they expect to be honoured.
Victorian Treasurer Michael O'Brien issued the determination. According to the article, a spokeswoman for the Treasurer did not return calls, so no further government comment was reported.
Investors should watch company ASX announcements and press releases for updates on any legal action, changes to provisions or guidance, and any formal responses from the Victorian government. These updates will indicate potential impacts on earnings and shareholder value.
Call 1300 880 160
Start a chat
Schedule a call
