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Treasury – Gambling Reform

Cassy O'Connor MP  -  Monday, 23 November 2020

Tags: Federal Group, Gambling Industry, Pokies

Ms O'CONNOR - Treasurer, when will parliament see the amendments to the Gaming Control Act?

Mr GUTWEIN - In the first half of next year.

Ms O'CONNOR - Are you able to update the committee on what shape that legislation is taking and whether the socially damaging bedrock principles of it are the same?

Mr GUTWEIN - In terms of the form that legislation will take, we took a policy to the election and the legislation that comes to parliament will deliver that policy.

Ms O'CONNOR - Are you able to tell the committee how you arrived at that policy given that it contradicted the advice of the Tasmanian Liquor and Gaming Commission? It contradicted the advice in fact of Treasury which said that the new licence or the new contract should be for about the life of the machine which is about five to seven years. There are social welfare advocates who have said that policy will cause enormous social and economic harm. How did you arrive at that policy position?

Mr GUTWEIN - After consultation over a long period of time.

Ms O'CONNOR - With the Federal Group and other gaming interests.

Mr GUTWEIN - I can assure you if you think that the Federal Group is happy with our policy then I would think again. Our policy ends the monopoly and I can assure you that that is going to have a significant financial impact on the Federal Group.

Ms O'CONNOR - Well, you will cut them a sweet tax deal though, won't you?

CHAIR - Thank you, Ms O'Connor. Mr Ellis has the call.

Mr GUTWEIN - I will not be verballed by you. We are working through the negotiations of that policy and as I have said the legislation will be introduced into the parliament in the first half of next year.

Ms O'CONNOR - Were social welfare organisations part of the negotiations?

CHAIR - Ms O'Connor, order. Thank you, Mr Ellis.


Ms O'CONNOR - Treasurer, are you able to tell the committee what the process was that led to the Government policy of directly licensing all venues which protects them from future competition, as you know, and abandoning a market-based mechanism? I have the letter here from your predecessor, when we wrote to him about proposed changes to gaming policy, and he says -

Our consistently held position is that the rights to operate gaming machines in Tasmania should be determined by an open and market based mechanism, rather than secret deals as has occurred in the past.

It looks like we are heading down the path of another suite of secret deals, doesn't it Treasurer?

Mr GUTWEIN - I cannot understand how you draw that conclusion.

Ms O'CONNOR - You are going to an individual licencing model, negotiations over casino tax rates and licence rates. It will be a closed club for every current company that is in the gaming machine market. The issue really is, how did the policy change from one that was open and market-based to an individual licence model, which the previous Commissioner for Gaming said would cause more social harm than the current system.

Mr GUTWEIN - Our policy was announced prior to the election and it was taken to the election. There is nothing secret about that policy. That was the policy that we publicly announced and then took to the election. Tasmanians understood very clearly what our policy was. I understand that you do not like it -

Ms O'CONNOR - It does not matter what I think. It is what the social welfare sector thinks.

CHAIR - Ms O'Connor, I ask that you allow the Premier to talk.

Mr GUTWEIN - I understand that you do not like it. I guess that is the reason that you are a member for the Greens and I am a member of the Liberal Party. We will have policy differences. We have one on this particular matter.

Ms O'CONNOR - Well -

CHAIR - You've had two questions, Ms O'Connor. Mr O'Byrne only had three before you; you've had two.

Ms O'CONNOR - The issue here is that Mr O'Byrne gives short speeches before he asks the question. I try to save time by not giving speeches and end up getting punished for it. There's no capacity for the committee to hear this really important information of public interest. In fact, a life and death issue.

CHAIR - Ms O'Connor, you've had six questions.


Ms O'CONNOR - Treasurer, you were talking before about being a member of the Liberal Party and how we are different philosophically, but the Liberal philosophy though is about a free market, an open market.

While you were not given an opportunity or you did not make the opportunity to answer my question from the last round, I am going to ask it again, Treasurer. Why did the Government walk away from a repeated commitment to have an open market-based policy in relation to the expiry of the deed and the future gaming market to an individual licensing model?

Mr GUTWEIN - I have explained this before. One of the key things I wanted to do was to capture additional value and there are two ways that you can do that. One is that you can put a licence to the market and you can receive payment for it or you can receive that value over time.

As I have indicated, with regard to the model that we took forward with pubs and clubs, that generates around $16 million worth of additional revenue each year. Over a 20-year period that brings in more than $300 million worth of additional value for the state. We felt that was an appropriate return of value to the state and we went with that model.

Ms O'CONNOR - Okay, so that we are really clear, that model involves effectively giving away poker machine licences up-front and the $300 million in revenue that you talk about will barely even touch the sides of the social costs that will be involved out to the year 2043. My question is -

Mr GUTWEIN - I would argue with you there in regard to the social costs. You are well aware that it is around 0.6 per cent of the population that is impacted in relation to problem gambling. The policy we have provided for effectively doubles the community support levy over that period, which I think you are aware of.

Ms O'CONNOR - I did not actually ask a question then. I will come back to you on that because social welfare experts and people like historian James Boyce have a very different understanding of what problem gambling is and how it is interpreted through the Social and Economic Impact Studies of Gambling report.

Treasurer, is it only coincidence that the proposed tax rate for hotel poker machines is exactly the same as that set out in the industry's joint submission to the parliamentary inquiry?

Mr GUTWEIN - In forming this policy, we looked at a range of models around the country and I am certain industry did as well. With regard to arriving at this policy, a judgment had to be made ensuring that we received what was an increase in value which is what our policy provides for and we took it to an election. We were quite open with that policy.

I know you have a different view on this and at the end of the day we will no doubt have to respectfully agree to disagree regarding that policy.

Ms O'CONNOR - Do you accept what the former gaming commissioner, Peter Holt, said about the likely social costs of the individual licensing model, how that is likely to have more human harm associated with it? As we know from evidence that was presented to the inquiry, it will deliver the venues a windfall gain of around $150 million. Do you accept that there are major flaws in the policy you took to the election and that those flaws will come at a human cost?

Mr GUTWEIN - I will not surmise on the point Mr Holt was making but in terms of the regulation of those licences, whether they are the individual licensing model or similar to the arrangements we have at the moment, they will still be regulated in almost exactly the same way.

Ms O'CONNOR - That wasn't his point. His point was that you have a monopoly deed.

Mr GUTWEIN - I am not sure what point he was making.


Ms O'CONNOR - Treasurer, you said earlier that Federal Group is not happy. Federal Group presented with the THA, from memory, at the parliamentary inquiry and were quite comfortable in the end with an individual licencing model, probably because they knew there would be some sort of compensation through the tax rate that was set. Why do you think Federal is not happy?

Mr GUTWEIN - I make that point on the basis that they have had, quite lawfully and legally, a gaming regime that they have operated under that has provided significant revenue to the business. In ending the monopoly, they lose that significant revenue strain. I would not expect that any business would be happy with that. Maybe it is a judgment on my behalf on how they feel, but it is a matter for th HA Estimates A - Monday 23 November – Gutwein – Part, we do not talk. My understanding is that about somewhere in the vicinity of about 30 per cent of the venues are owned by the Federal Group, so the hit on the Federal Group is not going to be absolute. Why are you negotiating with Federal about the casino tax rate? Haven't you already developed a policy that has a tax rate on the advice of Treasury and Finance that is set or resolved?

Mr GUTWEIN - I don't have a copy of the policy here with me but I thought that we had made it perfectly clear that we would look to arrive at what was an acceptable tax rate. I think the term we used was 'an acceptable tax rate', based on consideration of what was occurring in the market place. I think it was along the lines of that.

Ms O'CONNOR - It was but you walked away from that because it related to the market place on the mainland, as I understand it. The tax rates here will not reflect market rates on the mainland.

Mr GUTWEIN - What we very clearly said was that the Federal Group would retain two casino licences and operate Keno in Tasmania subject to negotiation on licence fees, tax rates and terms. Those negotiations are ongoing.

Ms O'CONNOR - You have the EGM licence going out to tender but the Keno licence is not going out to tender. Is that part of the trade off with the Federal Group for their 40 years of profiting off the back of Tasmanians and things are going to change?

Mr GUTWEIN - All I can do is repeat what our policy was, which is exactly what is happening. The Federal Group will retain two casino licences and operate Keno in Tasmania subject to negotiation on licence fees, tax rates and terms. We are in the middle of negotiating those matters.

Ms O'CONNOR - Are you negotiating or is Mr Ferguson?

Mr GUTWEIN - The Government has a unified position on that, both the Finance minister and myself.

Ms O'CONNOR - I just want to know who is at the table?

Mr GUTWEIN - We both are.


Ms O'CONNOR - Treasurer, why isn't the Keno licence going to tender?

Mr GUTWEIN - We are negotiating the tax rates on that at the moment. There are two ways you can look at this. One is that you can take something to market and receive an upfront fee, or you can receive a return on an ongoing basis.

Ms O'CONNOR - Or a combination of both actually.

Mr GUTWEIN - If you receive a combination of both you will usually receive a smaller payment going forward. This is a matter of negotiation at the moment and is in line with what we said in our policy.

Ms O'CONNOR - That is right. Just on your policy, why are casino poker machine taxes being set lower than pub and club poker machine taxes given that casino pokies are lower cost due to the economies of scale and higher profit due to their regulatory privileges?

Mr GUTWEIN - Regarding casino EGM taxes, or other casino taxes or fees and taxes, we are going through a negotiation on those at the moment.

Ms O'CONNOR - Who are you negotiating with?

Mr GUTWEIN - Well, obviously Federal, it would be negotiating -

Ms O'CONNOR - Just Federal? The THA as well or other venue owners?

Mr GUTWEIN - We have already announced the position for pubs and clubs.


Ms O'CONNOR - Treasurer, why did the Government decide on a 20-year licence period for the future gaming markets when the Liquor and Gaming Commission believed it should be around seven years, Treasury indicated it should be related to the length of machine life, which is five years, and Victoria decided on 10 years?

Mr GUTWEIN - In providing a context for investment, 20 years was deemed by the Government in our policy at the time to be an appropriate time frame.

Ms O'CONNOR - What advice or modelling did you base that policy on? Was it just advice from the Federal Group and venues?

Mr GUTWEIN - I took advice from a range of sources.

Ms O'CONNOR - When you talk about taking advice, you clearly didn't take advice from the Liquor and Gaming Commission and you didn't heed the Treasury advice. Where did the advice come from that made you, as Treasurer, and the party you are a part of, decide that a 20-year licence period was appropriate, obviously ignoring that that would lead to prolonged social and economic harm?

Mr GUTWEIN - As I have said, I take advice from a range of sources -

Ms O'CONNOR - But not from Treasury or the Liquor and Gaming Commission.

Mr GUTWEIN - I took advice from a range of sources and formed the view that that was an appropriate time frame.

CHAIR - Last question.

Ms O'CONNOR - Victoria decided on 10 years and little Tasmania doubles that. We are the state with the highest concentration of poker machines in areas of socioeconomic disadvantage. Do you accept that the decision to extend it to a 20-year licence prolongs that social pain?

Mr GUTWEIN - In terms of the premise of your question, I am not aware of what advice the Victorian Government took in how it landed its policy. I took advice from a range of sources and that was the decision that we landed on.

Ms O'CONNOR - You didn't take advice from Treasury or the Liquor and Gaming Commission, so we're presuming you took advice from the Federal Group and the THA.

Mr GUTWEIN - I'm not going to engage with you on that matter. You will have a different view on this to what I do.


Ms O'CONNOR - Treasurer, have you met with, or do you talk to, the nine-member gaming subcommittee of the Tasmanian Hospitality Association? They represent the major players from the Federal Group to the Kalis Group to those major players. Have they fed into the development of the policy and the legislation which is coming in the first half of next year?

Mr GUTWEIN - Concerning the policy that we are delivering through the legislation for pubs and clubs, that is exactly the policy that we announced at the last election.

Ms O'CONNOR - The first part of the question, about meeting?

Mr GUTWEIN - Have I met with them? I think I met with the THA executive. I am not sure if I have met with the nine members, but I have met them at one or two meetings over time. The policy that will be reflected in the legislation is the policy that we took to the election. It has been out there for two and a half years.

Ms O'CONNOR - How is your Government, the government of the free market allegedly, consulting with the 74 per cent of Tasmanian hotels and 96 per cent of Tasmanian clubs which do not have poker machines? Given the enormous windfall gain and potential for future profits that will be delivered to pubs and clubs, is there anything that your Government is prepared to do to level the playing field for those venues that have chosen not to have EGMs or who have not been part of that club?

Mr GUTWEIN - Whether a business has EGMs or not, largely that has been a choice of the business. You are as aware of businesses as I am that have actually taken a policy of not wanting gaming in their establishment because they want to offer a different option.

Ms O'CONNOR - A healthier option.

Mr GUTWEIN - That is the nature of the competition. When I was a publican I did not have gaming machines.

Ms O'CONNOR - Why?

Mr GUTWEIN - The hotel I bought did not have those machines. I decided that I would not pursue them and was quite comfortable linking food and beverage and accommodation. That was a choice that I made.

Ms O'CONNOR - Because you thought perhaps it would be healthier for your patrons? It would be a healthier venue?

Mr GUTWEIN - The decision to either take on poker machines or not and in relation to arrangements 20-years ago, is dependent upon caps at the time, opportunity and the choice that different publicans made. As you are well aware, there are some publicans today who market themselves as not having poker machines or other forms of gaming on their premises. That is what they want to do and good luck to them. That is the free market operating.


Ms O'CONNOR - Treasurer, could you and perhaps the secretary help the committee understand the tables that are in Budget Paper No. 1 that relate to the casino tax and licence fees? There is a foregone revenue of $3.6 million on page 55. As we move through the forward Estimates, in the parameter adjustments there is another set of numbers which have no footnote to explain them. Can we have some explanation for what happens to casino tax and licence fees this year, next year and the year after in the forward Estimates?

Then I point you to the revenue, which is on page 87, where the footnote makes it clear that 'Casino tax and licence fees do not reflect the Government's future gaming market policy'. It would be good to have some understanding of how those numbers might look, and I know it is speculative, going forward.

Mr GUTWEIN - Let me deal with page 87 first. Until the legislation is passed and until we finalise the negotiations with Federal on casino taxes and licence fees, including Keno, we are not in any position to forecast, other than the revenue generated by the state from 2023 onwards is around $16 million more for pubs and clubs.

Regarding the parameter adjustments and casino tax and licence fees, if you go to note 3 -

Ms O'CONNOR - Page 55. On page 67, note 3 only talks about the decrease for one year to April 2021. We see that in the taxation table but under parameter adjustments there is another set of numbers that extend into the forward Estimates.

Mr FERRALL - The first item is the policy adjustment, which was effectively -

Mr GUTWEIN - Was the waiver we provided for businesses overall.

Mr FERRALL - That showed the policy change for Government in the waiver.

Ms O'CONNOR - And the parameter adjustment numbers? What is the relationship between those numbers and the numbers above?

Mr FERRALL - The parameter adjustments would be changes that have occurred outside of Government policy decision making. I need to quickly check. That could be due to changes in the external environment that have changed those casino tax and licence fees but not due to a Government policy decision.

Mr GUTWEIN - If we cannot answer it I am happy to take it on notice and provide it for you.

Mr FERRALL - For every revenue change we try to do a policy and parameter adjustment and try to keep the policy decision separate from parameter changes which could be due to indexation. They could be due to something outside the Government's control like a decision by an external body, decision by the Commonwealth, et cetera. I would need to check what those specific ones in relation to that are. We can do that.

Ms O'CONNOR - We might write that down.

Treasurer, you have made it clear that you are negotiating what the casino tax rate will be under the future gaming market policy. How far are you going to let Federal Group call the shots here? You're the Premier and the Treasurer and the Federal Group has been telling Government of both colours what to do for 40 years. At some point, aren't you going to have to say what the tax rate will be?

Mr GUTWEIN - As I have indicated it will be a process of negotiation. That needs to take its course.

Ms O'CONNOR - Are you going to be told what to do by Federal Group or are you going to break with tradition?

Mr GUTWEIN - We are working through a negotiation. We are engaged in that and it would not be reasonable to discuss that process. As soon as a landing is provided you can make a judgement as to whether or not we got a good deal or a bad deal.

Ms O'CONNOR - It will be a bad deal because there will be pokies in pubs and clubs until 2043.

Mr GUTWEIN - I doubt under any form that you would declare it a good deal but we are in a process and the outcome of that will be clear to all Tasmanians.