Racing: National Party promises $25m tax break on betting

The National Party will give racing more than $25 million a year if elected.

In an astonishing move yesterday, National's Racing spokesperson, Lindsay Tisch, announced the party would align racing's betting duty with that paid by casinos at a net fiscal cost of $25 million.

The move is clearly a result of party leader Don Brash's recent looking into racing's affair and pressure applied by racing's Fair Tax committee.

There is no surprise over the timing of the announcement - tonight the five main political parties will announce their policies on the racing industry at a forum at Hamilton's Te Rapa Racecourse.

National have also promised big tax concession for thoroughbred and standardbred breeders, allowing a 100 per cent write-off for stallions in two years, replacing the current 25 per cent per year.

"This is a major victory," said Fair Tax chairman Rob McAnulty.

"The pressure we've applied has finally won through. It shows the numerical strength of the racing industry when it is applied with unity."

National's release yesterday:

Racing policy

National recognises that racing, breeding and ownership are facets of a unique agribusiness that contributes to our overall economy through employment, exports and related industries

Racing

Thoroughbred Racing and Standardbred Racing have been in relative decline for decades and there is a need for adjustment in the industry as consumers have greater choices over how to spend their time and leisure dollars. Greyhound racing has enjoyed some growth.

The proliferation of newer, competitive gaming products such as casinos, gaming machines and lotto has reduced racing's share of the gaming dollar.

The rise of offshore betting and interactive wagering has completely changed the competitive situation. Wagering is now driven largely by different rates of betting duty.

The viability of racing is dependent on a Gaming Product.

New Zealand Racing contributes $1.5 billion a year to the economy and supports 18,300 fulltime jobs and exports some $130 million-worth of horses.

Racing has enjoyed a special status, with its own legislation and Government minister, but this status has held the industry back, preserving the past rather than preparing the industry for the future.

Thoroughbred industry

The most significant issue for the New Zealand Thoroughbred breeding industry is its competitiveness with offshore breeding nations.

New Zealand is not competitive in the arena of taxation/specified write-down. The current taxation regime makes it less attractive in purchasing a stallion and instead many lease.

During the period 1995-2003 the level of New Zealand investment in new stallions fell from $7.9 million to $2.9 million - only one stallion of significance has been purchased last year, which is Savabeel at $10 million.

The trend is to lease (rent) shuttle stallions from foreign owners in the Northern Hemisphere rather than buying.

In 2004, $13.9 million was paid to overseas owners for shuttle stallions, which was fully tax-deductible.

Aggregated depreciation for stallions was withdrawn in 1986 while Australia has embraced write-offs.

The current write-down for stallions is 25 per cent per year.

* National will:

Allow 100 per cent write-off of stallions over 2 years.

Broodmares

Currently broodmares used for breeding purposes are allowed to be fully depreciated from age two (or higher) to age 11. However, older mares, approximately 300, start breeding on or after age 12 and have a current minimum write-off period of three years.

There is justification for writing-off these old mares in full once they reach 12 years, as in Australia.

* National will: Allow 100 per cent write-off from age 12.

Gaming duties

In 1995 the National Government reduced duty from 5.5 per cent of turnover to 20 per cent of betting profit. Casinos pay 4 per cent of betting profit on casino wins.

In racing, 20 per cent duty on betting profit equates to 3.3 per cent of turnover.

For casinos, 4 per cent duty on casino wins equates to 0.5 per cent of turnover.

There is inequity with respect to taxation compared with other gaming competitors and the industry is struggling to survive in the wider competitive entertainment sector.

Both racing and casino duty should be the same and based on betting profits. This will allow racing to deliver on its domestic potential and realise its international competitiveness.

* National will: Align racing betting duty with that paid by casinos (estimated fiscal cost $25 million).

Offshore TAB profits

Section 16 of the 2003 Racing Act states that offshore profits be distributed to the three codes on the basis of domestic turnover.

* National will:

Develop a new consensus on Section 16 taking into account the reduction in duty so no code is disadvantaged.

Summary

* Stallion write-off over two years.

* Old Broodmares 100 per cent write-off at aged 12 years.

* Align betting duty with casino duty.

* Ensure no code is disadvantaged under Section 16 of the Racing Act.