A coalition of Victorian councils is urging the state government to overhaul a tax minimization scheme for poker machine venues, asserting that the current system allows venues to exaggerate their community benefits. 

The councils are particularly concerned about venues pledging additional payments to communities as part of their bids for more poker machines, arguing that these initiatives do not counterbalance the detrimental effects of gambling harm, reported The Guardian.

Their grievances revolve around a tax break scheme that grants Victorian clubs financial benefits if they allocate 8.33% of gambling revenue to community initiatives. However, investigations reveal that a substantial portion of this money is directed toward the clubs’ own operating costs and upgrades, masquerading as a “community benefit.”

Ranka Rasic, the mayor of Brimbank council, expressed frustration and disappointment, emphasizing the acute gambling harm experienced by her constituents. Rasic insists that the state government needs to confront its dependence on gambling venues for income to resolve the persisting issue.

In October, it was revealed that Australians have set a concerning record, with losses from poker machines reaching AUD 14.5 billion ($9.25 billion) in the last financial year, a significant increase from the previous year. 

Victoria’s Councils Unite for Poker Machine Reform

Last month, all councils in Victoria collectively urged the government to promptly review the scheme to ensure that losses from gambling are genuinely reinvested into the community. In May, councils advocated for redefining “community benefit” to ensure that gambling profits are shared with legitimate philanthropic organizations or charities, rather than being channeled into the clubs’ self-serving upgrades.

The push for reform is spearheaded by a subset of mayors, primarily concerned about the disproportionate harm inflicted by poker machines on socioeconomically disadvantaged communities where losses are significantly higher.

The Greater Dandenong city council, located on Melbourne’s south-eastern fringe, stands out as one of the most culturally diverse and disadvantaged in Australia. With an average loss of $801 per adult to gambling annually, the council is at the forefront of the call for reform. This rate is almost nine times higher than the losses in Boroondara, one of the state’s more privileged areas.

An ongoing parliamentary inquiry has highlighted concerns raised by local governments about applicants failing to deliver on promises to fund community activities.

The councils’ call for reform underscores the need to address the exploitative practices of poker machine-operating clubs, ensuring that tax breaks genuinely benefit the community rather than serving as a cover for self-serving agendas. The state government’s response to these demands remains awaited, with gaming minister Melissa Horne yet to provide comment on the matter.

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Poker machine properties in Victoria seem to be exploiting the local laws to avoid taxes. As reported by The Guardian, venues have spent $184 million of gambling profits on themselves over the last financial year to get tax cut.

The clubs in question justified the money as a “community benefit.” For reference, Victoria allows clubs to reinvest 8.33% of their revenue into community initiatives to get a tax cut. However, clubs in Victoria would often label renovations and operating costs as community causes, thus getting tax cuts while using the money for their own good.

In the meantime, poker machine venues only spent $23,000 beyond what the law requires on gambling harm prevention measures and tools.

This scheme has evidently attracted some opposition, with opponents criticizing the clubs for exploiting the law and the state for not patching up the loophole. Hume City mayor Joseph Haweil went as far as alleging that the scheme is being rorted by the poker machine clubs. His critique echoes the words of Tim Costello in New South Wales, who has criticized a similar scheme in the neighboring state.

Victoria Is Introducing New Regulations

The aforementioned figures were just published by the Victorian regulator and show that clubs, in fact, spent only $13 million on actual community initiatives, such as gifts, sponsorships and donations. The rest of the $184 million the clubs spent on themselves to pay off operating costs.

Amid intense scrutiny, the Victorian government is currently working on some reforms and is tightening controls on casinos. Under a newly introduced bill, all gambling machines in all gambling properties (with the exception of Crown Casino) will have to shut down between 4 am and 10 am. The measure will come into effect from mid-2024.

In addition, the Australian state plans to introduce mandatory loss limits for daily poker machine losses, although this measure is still in development. The measure will likely force players to use a card to sign in and will help the state‘s crackdown on gambling-related fraud.

The reforms come in the wake of huge scandals involving Star Entertainment and Crown Resorts. Speaking of Crown, the casino and hospitality operator is currently trying to renegotiate its taxation terms with the State of New South Wales amid financial trouble.

At the same time, workers from the Crown Melbourne property are preparing to strike.

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Crown Casino has been issued a $30 million fine for violating problem gambling and money laundering regulations and allowing gamblers in Melbourne to deposit bank cheques made out to themselves.

The fine was issued by the Victorian Gambling and Casino Control Commision (VGCCC), which also claimed that Victoria’s 2021 royal commission into Crown Casino discovered that the gambling giant allowed punters to gamble at its Southbank casino with uncleared bank checks.

Under state laws, casinos are authorised to accept cheques only on certain occasions. Their use is strictly controlled to prevent potential issues like money laundering and fraud.

The VGCCC stated that the Crown’s “serious contravention” was an undocumented practise that undermined controls. Casinos are required to document all their practises to properly inform the regulator of their activities.

TOP: AUSTRALIAN ONLINE CASINOS

In a statement on Thursday, VGCCC chair Fran Thron revealed that the commission would delve even further into Crown’s practises to ensure no more regulations were flouted.

“This is the second time we’ve taken action on undocumented practises at the casino, and we will investigate further to ensure there are no more. To be clear, we will not allow the casino to conceal its practises to avoid scrutiny,” Thorn said.

“Practises like accepting bank cheques expose Crown to the risk of money laundering, put patrons at risk of gambling harm, and compromise our ability to ensure the casino runs with integrity, safety, and fairness.”

The regulator discovered that between 1994 and 2021, when Crown allowed gamblers to use bank cheques in exchange for gambling chips, over $1.5 billion worth of checks may have exchanged hands.

In one case, long-time gambler Ahmed Hasna, who was a frequent customer of the Southbank casino between 1993 and 2019, gave a cheque for $100,000 to Crown in exchange for gambling chips. Before the cheque was cleared, the gambling firm honoured it by giving Mr. Hasna $100,000 worth of chips.

It was eventually discovered that the cheque bounced. To recover its gambling chips provided on credit, Crown reportedly told Mr Hasna, who was suffering financial hardship and gambling addiction at the time, that he could continue gambling at the casino.

The punter was also allowed to retain his highest-tier black card privileges as long as the $100,000 debt was repaid from future winnings.

Although the VGCCC could not build up suspicions about Crown’s use of blank cheques, the regulator has ordered the company to ban bank cheque and blank check practises. Crown’s policies are surrounding bank cheques also under review, as are policies concerning other undocumented activities in the Melbourne gambling venue.

A spokesperson for Crown Resorts stated that they had accepted the fine and intended to work with the regulator and Victorian government to deal with this and other issues discovered by the Royal Commission.

“These practises have ceased, and we have implemented significant improvements to reduce and prevent risk across our business,” they said.

“Under new ownership and leadership, our Future Crown program is driving whole-of-company reform as we continue to uplift our culture and build a Crown that exceeds the expectations of our stakeholders and the community.”

This is the third time Crown Casino has been issued a monetary penalty following the royal commission’s discovery that the company was unsuitable to hold a gambling licence. It was given two years to prove its suitability.

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Crown Melbourne the Victoria-based property, which is currently under a special supervision regime, is expected to be restored to full operations early next year. Before this happens, however, the Victorian Gambling and Casino Control Commission would have to decide on the operator’s suitability first.

VGCCC Prepares for Transition-out Plan

Should Crown Melbourne fail, though, the VGCCC already has what Kimmitt has described as a Plan B, which could see the regulator make sure the property runs even if the iconic operator is no longer deemed capable. Kimmett dismissed media speculation that properties are too big to fail – failure was an option, she said, and it was up the newly-setup regulator to find a way to move past a worst-case scenario.

Presently, the Melbourne casino is still under a special monitoring regime, carried out by a Special manager, and will continue to be so until next year when a final decision ought to be made. Stephen O’Brien, who supervises the remediation efforts undertaken by Crown, will make recommendations to the VGCCC at the end of this year and seek to help the regulator arrive at a decision.

The commission though is not shy about what would happen if Crown failed. According to Kimmett’s interview with Inside Asian Gaming, the regulator and Crown are already working out a “transition-out plan.” This is done in order to ensure that jobs remain intact and that the property, which is an important part of the state’s economy, remains open and thriving.

Crown Continues to Collaborate Fully

Kimmett confirmed that Crown has not baulked at the suggestion, and the team at the operator has been cooperating fully with the VGCCC. Crown is now the property of Blackstone, a global investment group, which did not hesitate to acquire the beleaguered casino brand even though it faced multiple legal challenges in Australia.

“What was really pleasing in working with Blackstone is that when we put to them that much higher bar of expectations, they signed up to it,” Kimmett said Despite the plan, though, things so far seem to be looking up for Crown and Blackstone who are confident that they will be able to restore their reputation with the regulator and continue business as usual from 2024 onwards.

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