Legislative Council, Tuesday 9 November 2021
Ms FORREST (Murchison) - Mr President, I rise to speak on this bill, a bill that is very complex, not least due to the complexity of the taxing and licensing arrangements, but also as an amending bill which you really must have the principal act on hand to cross-reference.
I did think when reading through, scrutinising every clause that a completely new gaming control bill might have been a much easier option.
Add to this the vast array of proposed amendments, and it makes for a very complex task and one I will not support working late into the night to deal with this bill. A bill that clearly requires full and proper scrutiny and understanding.
We all know decision-making is impaired when people are fatigued.
While it may be deemed reasonable in the other place to work late into the night where party members can take many breaks, spend their time relaxing in their offices or socialising with many only needing to turn up to vote, this is not the case for me or most of the members here.
I also was deeply disturbed to hear from those observing the debate it appeared that some members who were generally only returning to the Chamber late at night to vote were clearly under the influence of alcohol and could be heard saying as much.
Those members can speak for themselves around the veracity of this but I find it abhorrent and deeply concerning that with such important deliberative work being undertaken by members of parliament, including considering and voting on matters that will have an impact on all Tasmanians one way or another, they are not fully alert, sober and engaged.
That said, I will speak broadly about the bill but focus on some key areas: the tax and licensing arrangements and the need for greater harm minimisation measures with a preventative public health framework.
I find the public discourse on gaming policy deeply unsettling. For an issue that has been with us longer than I have been in public life, there is remarkably little understanding of the problems and a willingness to find honest, decent and fair solutions. I am not just talking about the social harm by gambling, which is the main focus of the public discussion. I am talking about the government-sanctioned greed of the industry, which is largely overlooked. The Government stated Future Gaming Market policy included a requirement for an appropriate sharing of the returns from gaming.
I ask the Leader or anyone else in this Chamber, to inform me as to how we can possibly ensure returns from the gaming industry are shared appropriately among industry, players and the government representing the community, if we do not know what those returns are.
Isn't it the first question that needs to be answered? What are the returns from the gaming industry? The corollary is, how do we appropriately share the returns among industry, the players and the government representing the community?
Do you know, Mr President? Can the Leader tell us? Can the Leader of the Labor Party in this place tell us?
I am looking forward to hearing from those members who are members of political parties who must have discussed the size of the cake, before agreeing to split it in the way this bill proposes.
After this bill passed downstairs, I heard self-congratulatory plaudits from both major parties. How they had finally broken the Federal Hotels' monopoly and secured more for the industry and a little more for government. They had finally slayed the dragon and we should all be eternally grateful for their bravery in tackling such a feared opponent.
What exactly was the problem this bill was supposed to solve? Federal Hotels' monopoly, or money that flows from that monopoly position. Is that it? Let us be fair. All monopolies are not necessarily bad. There can be such a thing as a benevolent monopolist.
Having a sole licence has made the industry far easier to regulate. Just ask Peter Holt. You will have the chance to ask him that tomorrow or the current members of the Liquor and Gaming Commission.
Let us be honest. The gaming industry is such a heavily regulated industry, it matters little whether it is a monopoly or an oligopoly. There is no prize competition. All venues offer the same product at the same price.
It is clear Federal Hotels have a monopoly in the casino industry. However, with regard to gaming in the community, whilst Federal Hotels have held the sole licence, for all practical purposes it has been an oligopoly, between Federal Hotels and a few select pubs. Federal Hotels was the head honcho, but the pubs were crucial members of the gang.
It has been an uneasy relationship at times, with some gang members envious of the large amounts of cash from player losses that built up in their bank accounts, most of which were swept away once a week by Federal Hotels.
If only we could hang on to a bit more for ourselves, we heard them say. Federal Hotels saw the writing on the wall. The arrangements were far too generous. All good things must come to an end at some stage and the 2003 arrangements had a sunset clause.
The Government decide to legislate to redistribute the oligopoly profits away from the boss to other gang members. That is what this bill is about.
It is not about breaking Federal Hotels' monopoly. That is a convenient smokescreen. It is about giving pubs more. The EGM industry is awash with cash. Pub owners want more for themselves and the Government has obliged.
The meagre amounts the Government has managed to secure for the community are trifling. They are hardly going to cover the extra cost to regulate 90 licence holders rather than one. And the players get nothing. The way to give players more is to take less in the first place. If you can't, or won't, slow down EGM spin rates, or reduce bet limits - neither measure which is likely to detract from the alleged enjoyment from playing gaming machines - then simply increase the returns to players.
The question we should be asking ourselves is, is the extra being given to the pubs, under this bill, an appropriate sharing of returns? This is the key question, Mr President. I hope other members in this Chamber are listening in other places, because it is really important everyone understands this. Do we and will we understand what are these returns?
Let us look at EGMs in pubs and clubs. Now members may wish to have a piece of paper and pen handy, because I am going to give you some figures and it will help you to write them down, so you can follow along.
Last year, player losses or gross profits from game machines, as the act describes them, was $117 million. Now I will explain how this figure was calculated. Under the current oligopoly arrangements, pubs and clubs receive 30 per cent of player losses, that is $35 million. Pubs are required to pay Network Gaming a fee covering machine hire and a promotions levy. This provision was enacted in 2003 at the behest of Federal Hotels, section 153AA of the current act. The fee is approximately $4500 per EGM per year. There are 2305 EGMs in the 2020-21 year, therefore machine hire costs were estimated at $10.3 million. Then come other operating costs. The direct costs of operating gaming machines consist mainly of wages. Wages represent approximately 7 per cent of player losses. Together with electricity and some cleaning costs, the total variable costs of operating poker machines in pubs is approximately 10 per cent of player losses so 10 per cent of $117 million, that is a further cost to pubs of $11.7 million. To clarify some of the figures, the 10 per cent figure for the direct variable costs of running poker machines in pubs is an industry benchmark. I am not making it up.
Members may recall a case study submitted to the 2017 parliamentary inquiry by the Dixon Hotel Group which confirmed the wage percentage at 7 per cent of player losses, hence 10 per cent for all variable costs is about right. If we deduct machine hire costs of $10.3 million which I referred to previously, and the variable costs of $11.7 million from the commission of $35 million, pubs are left with $13 million. That is the net return to pubs from pokies - $13 million. In other words, the $13 million is the contribution of gaming to the pubs' overall gross profits, which when combined with returns from other departments, comprising the pubs' activities, such as food and beverage, bottle shops, accommodation, net returns from all departments go towards covering enterprise overheads such as rates, insurance, rent and returns to owners et cetera.
To summarise, to bring it all together for you, player losses last year in 2020-21, were $117 million. Commission received by pubs was 30 per cent or $35 million. Fixed costs, machine hire, approximately $10.3 million; variable costs, wages, electricity et cetera were approximately $11.7 million. The amount remaining was therefore $13 million. That was the total profits from pokies in pubs. It may not be a particularly large amount of money but I make two further observations. First, the returns are not evenly spread across the 93 pubs and clubs with pokies. Second, the amount is considerably more than would have been made if the gambling area had been devoted to food and beverage operations. Per square metre it is a much higher figure than you would get if you had food and beverage in that same area, not at the same time, obviously.
Gaming in pubs is already very profitable, particularly so when player losses are greater than the average. Once break-even is reached, profits increase by 20 cents for every $1 of player losses, a very comfortable net profit margin. To continue to build the full picture, what are the average losses per EGM, you may ask? We also need to know that. Last year in the 2020-21 year the average losses per EGM were $50 000. That is the average loss per EGM across the whole pubs and clubs EGMs. The number of EGMs per venue varies from 10 to 30, the average number being 25. All the top performing pubs in terms of profit have 30 machines. The local division of Elwick tops the list of losses. On average, the losses in Elwick are estimated at $85 000 per EGM against the state average of $50 000-$35 000 per machine more, not insignificant.
Your electorate, Mr President, you may be interested to know, generates losses of approximately $68 000 per EGM, again above the state average. Pembroke and Montgomery generated estimated losses of $60 000 per EGM, still above the state average; Mersey, about $49 000 - just below the state average - and my electorate of Murchison, about $44 000 per EGM, quite a bit under the state average. Sadly, the member for McIntyre is not in the Chamber at the moment but the member for McIntyre's electorate suffered approximately $28 000 of losses per EGM, so, the poor cousin, if you like.
Mr Valentine - Hobart? Have you got Hobart there?
Ms FORREST - They are all there. I could read you the whole lot but I am not going to take the time doing that.
Mr Valentine - I will dig it out.
Ms FORREST - I just want to make a difference in how it is not spread evenly across because this is the point I am making. There is a vast disparity between the losses across Tasmania, yet this bill sets a tax on licence fees that does nothing to claw back for the benefit of the community what would have been clawed back had the licence to operate poker machines gone out to tender as originally proposed rather than just being gifted to existing operators.
Mr President, bear with me as I explain just what the level of profits are in both Elwick and McIntyre, at either ends of the scale - the highs and lows across the state, if you like - and how the proposed changes in the bill will impact them. I am going to talk about losses on a per EGM basis or per machine basis.
In Elwick, as I said, losses were $85 000 per machine for the last year. Applying the commission rate of 30 per cent less fixed costs, including machine hire of $44 500, and variable costs - wages et cetera - of 10 per cent, $8500, the profits from gaming were $12 500 per EGM. Mr President, you might need to remember this figure. That is, the profits in Elwick for the last year were $12 500 per machine. With 30 EGMs per venue - and there are six in Elwick - the average venue makes profits after direct costs of $375 000 per year based on the 2020-21 loss figures. That is Elwick.
That is a staggering amount - $375 000 per year and it is profit, not turnover, so, this is the cream on the top. I am not sure all members realise how profitable the top earning pubs are under the current system because that is what I am talking about - the current system. I am not talking about the proposed system here. I will get to that. The floor area devoted to poker machines is not large. Fortunately, there are only 30 machines per venue.
I have had estimates done for me about what food and beverage operations would produce from a similar area and that figure is $60 000 per annum on average. Pokies make $375 000 per year, food and beverage would make $60 000. I have yet to see the Government or the Opposition, for that matter, try to identify the level of profits so I am here doing it for you. Yet both parties have decided that pubs should receive more.
Seriously, what is wrong with us that we are allowing such excesses and few are willing to even acknowledge it? The member for McIntyre is back. I am just about to talk about yours at the bottom end of the scale.
Ms Rattray - I have been listening.
Ms FORREST - I am sure you have.
Ms Rattray - Yes, 28 per cent. Got it. Thank you.
Ms FORREST - So $28 000 per loss per machine. At the other end of the scale is McIntyre with nine venues with an average of 19 machines each with player losses of approximately $28 000 per machine. The net profits in McIntyre from commissions less fixed and variable costs end up being $1100 per EGM, as opposed to $12 500 in Elwick. With an average of 19 EGMs per venue, that is net gaming profits in McIntyre of about $20 000 per EGM venue, a far cry from the $375 000 per venue in Elwick. Okay.
Ms Rattray - The people in McIntyre are flat out working and have not had time to -
Ms FORREST - I will tell you what it could mean for your pubs and clubs in McIntyre in a moment. It is important we understand the current arrangements before we consider the changes proposed in the bill. I have told you how it works now. I hope that all members - Liberal, Labor and Independent - fully understand the current arrangement in order to fully appreciate and make decisions on the way forward.
What is proposed in this bill is for venues to receive all player losses, okay, and then after that they will pay tax and GST and after that venues will end up with 52 per cent of player losses, versus 30 per cent commission under the current arrangements. I note there will be more fixed costs for venues, the core monitoring functions, the regulated fee functions and the market based functions, plus a licence fee to the Government per EGM.
In total, fixed costs will be about $10 000 per EGM, including hire lease costs for the EGMs. Variable costs, wages, et cetera will not change and energy and power costs. This will leave net profits per EGM in Elwick at $25 000. Okay. Remember, it was $12 500 under the current arrangements, this will change it to $25 000 and therefore a staggering doubling of net profits compared to the existing arrangements. Was the member for Elwick aware of that? You were not.
Mr Willie - I will certainly acknowledge the problem in my electorate and I will make a contribution tomorrow.
Ms FORREST - Yes, this is a doubling. What this bill will do will double the return - the net profits in Elwick from $12 500, which I think is pretty fair at the moment, to $25 000. Once break-even is reached, venue profits will increase by 42 cents in each dollar - for each dollar in player losses, double the current rate. It is an extraordinary money grab.
A 30 EGM venue in Elwick will average an estimated $750 000 in net profits under the proposed changes. That is just the profits from pokies after all direct expenses. In the case of the EGM venues in McIntyre, the proposed arrangement will lead to an estimated $1800 of net profits per EGM, an increase from $1100 under the current system, so not a big difference in many respects. But it shows the disparity between the top performing pubs and the poorer performing pubs, if you want to call them that.
Whilst licence fees per EGM will be slightly less for smaller venues, it is likely the cost of market based functions, like training, machine hire and lease, for example, will be much more for smaller venues in the more remote areas of McIntyre and of course, the remote areas of Murchison. With 19 EGMs on average, McIntyre pubs will end up with net gaming profits of about $34 000, compared to $750 000 for Elwick venues. Is that sharing the profits and the benefits equitably?
Ms Webb - It is the same regulatory headache though.
Ms FORREST - Yes, but I am talking about meeting the objects of the bill here. The smaller sized venues in McIntyre highlight the possible pitfalls in this bill. As I have noted, I too have a few smaller venues in my electorate and as with those in McIntyre, I believe those premises will be challenged under these new arrangements. So much for saving the pubs and for the ‘love your local’. They may not be in existence because of the inequitable distribution under this model being proposed.
A new higher level of fixed costs, particularly the unknown cost of all the market based functions and the finance costs associated with EGM purchases means smaller venues where EGM losses are less than $25 000 per EGM face an uncertain future. They are the ones in your electorate and possibly, some in mine. It is hardly an equitable approach if that is what is intended. I now ask the Leader to respond to this in her reply, is this what is intended, as it is likely to be the outcome?
And then there is the proposed amendment to section 38, which imposes a financial liability or sustainability test, which must be of some concern, particularly for smaller venues in our regions when they have to demonstrate they have that financial viability when it is going to be really tough, certainly when we do not know what those other costs are.
Furthermore, I still do not know whether the equity in the partly paid EGMs will transfer to venues at changeover date or whether venues will have to pay Network Gaming for the equity, which I guess legally belongs to Network Gaming, despite the fact it has been the venues, or more accurately the players at those venues, who have been paying for those EGMs. That is a question that I will be asking in the briefing tomorrow, just for the heads-up for those who may be taking notes.
I hope the Leader can enlighten us and explain this important matter because it is a significant issue and I know there are differing views on who owns what in that area. I could spend hours going through every electorate, as I said to the member for Hobart, I could but I will not. I think I made the point about the inequitable distribution. I have established the level of profits and their skewed distribution across Tasmania and how the proposed changes in this bill will make matters worse.
As I said before, the idea that this bill is aimed at breaking Federal Hotels' monopoly is a giant smokescreen for a staggeringly and totally inappropriate handout to a few pubs. It shows an intellectually lazy and incurious attitude to understanding what the true nature and profitability is of the current industry.
One of the alleged benefits from breaking the monopoly are lower prices for consumers. Well, that will not occur here. Nothing will change for consumers and it will be more difficult and costlier for the government to regulate.
Breaking the monopoly is a massive con job. It is just a three-word slogan. There are times when we would be better off with a properly regulated monopoly or tightly controlled oligopoly. This is one such time, in my view.
The noble aims of the Future Gaming Market policy to find an appropriate way to share returns from gambling between players, the industry and the community have been totally ignored. How can we adopt such an approach when it is clearly at odds with the very objects of this bill, as stated in clause 32? Open it up, have a look. Section 2A inserted, at part (c) that states:
ensure that the returns from gambling are shared appropriately amongst the gaming industry, consumers and the State.
The way this bill is drafted following instructions, obviously, from Mr Ferguson who is in charge of the change - how can he look at himself in the mirror and honestly say this bill achieves that objective? How can he? Unless he does not understand it.
Furthermore, the other stated objective of the bill, as stated in the same section under subclause (b) states the object is to:
protect people, particularly people who are vulnerable, from being -
(i) harmed by gambling; or
(ii) exploited by gaming operators.
Again, I ask what measures have been included to enable Mr Ferguson to be satisfied, according to his Christian values, that this objective is met when we know these machines were designed to be addictive and to cause harm for some users and there is no legislated approach to removing well-known and understood harmful design features? I am talking about facial recognition and some of the measures the Leader had inserted into her second reading speech from comments made from things that occurred in the other place does not cut it.
We know there are inherently design features in these machines and this bill does not do anything that, in my view, would meet that objective to protect people, particularly people who are vulnerable, from being harmed by gambling or exploited by gaming operators.
Furthermore, when the Government claims its recent electoral wins are evidence that the public approves of the proposed changes, I ask can anyone honestly say electors had any idea whatsoever about the unbelievably huge profits among top gaming establishments under the current arrangements, let alone the framework containing this bill? Did anyone here know that? I take it the silence means, 'no', otherwise you would say you did.
Ms Webb - Some of us did.
Ms FORREST - Maybe some did. Perhaps, the member for Elwick can tell me how many people in his electorate would be in favour of the average EGM pub in Elwick increasing its profits from pokies to $750 000 per year?
Mr Willie - As I said, I will make a contribution tomorrow.
Ms FORREST - How many Tasmanians generally are happy with this? I can say none who I spoke to, once they understand what has been agreed by the lower House supporting this. The hundreds of emails I have received from my electorate and beyond do not support this. They do not support such an unequal distribution of the spoils.
We should not pretend it only happens in Elwick because it does not. As the Leader well knows, there is a venue in her electorate with an estimated EGM loss of over $100 000 per EGM, actually just across the boundary. Under the proposed changes in this bill that pub will make an estimated $960 000 net profit from pokies. That is almost $1 million.
There is a primary school two to three minutes down the road from that pub, just across the electoral boundary now in Murchison. I have been lobbying the minister for years to help rebuild a completely new school to replace the school unfit for purpose and here in one fell swoop as a result of this bill, a nearby pub will end up with a half a million bucks better off every year. Is that what we are agreeing to here?
I am flabbergasted and incredulous neither party seem to be questioning this largesse. Mr Ferguson was reported as saying when this bill passed downstairs, that we will have more money for essential services such as health and education. Really? It is a trifling amount that the Government will actually get given all the challenges, as we all know. We could easily have so much more whilst leaving all venues better off under the current system. They are still profitable, as I have described to you earlier, some much more so than others. The super profits could come back to the government, to the community. It says here, 'the Government is representing the community'. Money to the government is the community.
Opposition finance spokesperson, Dean Winter, was reportedly outraged at the fact that a few Hydro Tasmania executives recently received $2.4 million in severance payments. He said in effect, 'it is disgraceful that these excessive amounts are being paid out to an elite group. Under the Liberals' watch this excess is extreme and it will disgust Tasmanians'. He went on to say that he, 'defied the responsible minister to front Tasmanians and explain how these payments can be justified. At the same time as this Government allows this, Tasmania's housing waiting list has reached an historic high and thousands are stuck on the Liberal Government's waiting list for elective surgery and dental work at the same time families are struggling with the basic cost of living' et cetera.
I have never heard such hypocrisy on such a grand scale from someone who had just waived through a handout equal in size to the amount he finds so objectionable when paid to executives pursuant to a contract, to a few select pubs. Maybe he did not know what the numbers were but if he did not, what was he doing? Not just once, this is every month in perpetuity, this is a one-off payment to the Hydro executives based under their contract, like it or not, that is the contract. This is a handout of that same size every month in perpetuity. He was not complaining about that.
How are we ever going to raise more revenue for things which Mr Winter is shedding a river of crocodile tears about if we allow huge amounts of cash to be channelled just to a privileged few? That is why I find the public discourse about gaming policy deeply unsettling. I think we can make this bill better. I do not accept the binary nonsense from Mr Winter when he says, all legislators were given a choice for this legislation. We either back the legislation that ended the Federal Group's monopoly on gaming machines in Tasmania or we voted against and kept the exact same thing in place.
There are lots of ways we can make this legislation better and more in keeping with the ideal of the Future Game Market policy and the objects of the bill. That is our job, is it not? As a result, I will be seeking some amendments and will also consider others put forward, should we get to that place.
The original intention of the Government, as I understand it, was for a tender to allocate EGM licences. In theory, this was the way for a community to get an appropriate return from pokies by requiring operators to tender and pay an up-front fee but when it was decided to allocate licences to existing operators the tender process became redundant. Why would a current operator bid any more than $1 for a licence that had already been allocated to them? It was decided to institute a system of licence fees in amending section 148 of the principal act through a sliding scale based on the number of EGMs in the venues. But that system, as I have alluded to in my comments, fails to capture the super profits that a properly designed tender would capture, in theory. The only way to capture more of the super profits is to levy a licence fee based on player losses in the previous year. It was an idea floated by prominent owners, the Dixon Hotel Group, in their submission and evidence to the 2017 Joint Parliamentary Inquiry into Future Gaming Markets.
What I will be proposing by way of request for amendment is a stepped rate of fees based on turnover in the immediate prior year so as to give the community a more appropriate return and complying with the objectives and principles of this bill. Small venues with lower losses will be better off but those who can afford to pay will pay more. That is how the system is supposed to work, is it not? Even so, importantly, none will be worse off than under the existing arrangements - arrangements that, as I have already illustrated, remain very profitable. Isn't what I am proposing what we are trying to achieve?
Under what I am proposing, McIntyre pubs will be better off by approximately $13 000 on average. Elwick pubs will be worse off by $350 000. There are six of them so that makes $2.1 million a year and that is an extra $2.1 million - this is the super profits - for the community and that is just from one Legislative Council electorate. All done without any of those pubs being worse off but the community is better off.
Ms Webb - How appropriate that sharing would be.
Ms FORREST - Yes, I know. It would actually fit in with the objects of the bill too.
Ms Webb - It certainly would.
Ms FORREST - Across the state, licence fees will be $12 million as opposed to $4 million, as currently proposed. An extra $8 million could easily be raised every year based on the 2020 21 figures. The Government decided to abandon the proposed tender system but I am sure Tasmanians still expect the Government to secure as much for the community as is reasonably possible. That is what all the rhetoric has been about.
I believe pubs should pay more, especially the top earners, and I have no doubt whatsoever, as confirmed in my consultation on this bill, that such a move would have overwhelming community support. We are talking about the super profits here, we are not talking about the profit that they are experiencing now, although some of it is still quite excessive. I have tried to explain my understanding of the current arrangements for EGMs in the community and how we should be structuring licence fees.
The other matters I wish to discuss are tax rates and the Community Support Levy. The bill proposed to reduce a tax applying to the gross profits or player losses from EGMs at casinos. Player losses, effectively, are gross profits. It is locals who feed the machines. The tourist dollars are minimal and we know that. There is no prima facie case or public policy reason why the tax rate should not be the same as the pub down the road with EGMs.
I will be proposing a request for the House of Assembly to consider an amendment to that effect. I know there will be others not in this place right here now who will not be happy with that. I have had discussions with them. The argument advanced when the Government's policy was presented by the industry in the 2017 joint parliamentary committee at the 11th hour was that a reduced rate for casino EGMs be based on the north Queensland model. That was referred to by the Leader in her second reading speech.
The so called north Queensland model was a series of Queensland acts each designed to attract casinos to north Queensland cities. The economic justification is the infant industry argument - developers needed government assistance to make projects possible or, at least, that was the argument that was used. I notice those casinos have changed hands two or three times at least in Cairns and Townsville but that was the argument for those lower rates.
Federal Hotels used the same arguments when Wrest Point was developed over 30 years ago into a facility with high-class convention facilities. They argued at that point for a lower tax rate to support that development but that was 30 years ago. The facility was built and paid for largely from player losses from the pokies. It has been built and paid for by those losses.
Ms Webb - Many times over.
Ms FORREST - Yes. The facility now competes with other conference and convention facilities that have sprung up in Hobart. To continue to offer a subsidy via a concessional tax rate to one at the exclusion of all other competing facilities, I would say is grossly unfair. Some of the extra revenue raised could even be used by the Government to attract even more convention businesses to Hobart for the benefit of the whole industry, not just the benefit of one privileged player in the industry. There comes a time when an infant industry argument is no longer valid. As we parents know, an infant needs to be weaned at some stage lest it turns into an overly dependent adult.
Whenever we talk about taxes we need to be mindful of the reasons we set the taxes we do and the rates at which we choose to set them. Taxes are sometimes levied just to raise funds. Taxes are sometimes levied at particular levels to discourage certain behaviour - smoking, for example. Taxes may be levied at concessional rates to encourage certain behaviour, for example, to encourage a developer to build a casino in north Queensland. Taxes are levied at concessional rates for political reasons. There is little doubt in my mind that concessional rates in this bill fall into the latter category, if they don't qualify for any of the first three categories I mentioned.
We don't need more EGMs in casinos. Their numbers are specifically capped. The question we should be asking is, why are they concessionally taxed?
Tourists don't come to casinos to play the pokies. In any event, players play regardless of the tax rate. If they are coming to do it, the tax rate doesn't make any difference to them. It is the same question. Why give casinos concessional tax rates for EGMs?
I wish the Government would be more honest with the reasons for the concessions to casinos instead of using the infant industry argument to justify a race to the bottom.
In the absence of any cogent reasons for taxing casino EGMs at a concessional rate, I am proposing we make the rates the same as that applying to EGMs in the community. I have heard no reason to do otherwise from those other than the clear beneficiaries of the concessional rate.
Given the Government was so keen to scour the Federation looking for suitable tax models, why did they ignore South Australia, for example, where keno is taxed at 46 per cent, and that is paid into a hospital fund? I think we all agree; our hospitals would welcome that. Surely, if we have a genuine concern about our underfunded hospitals, we should consider that possibility.
I propose that we should raise the tax rate that applies to keno in casinos as well as in pubs and clubs, to the same as which it applies to EGMs in the community. Again, the absence of cogent reasons why we should not be levelling the playing field and setting taxes that are fair and equitable. For all intents and purposes, keno is actually a type of lottery. Lotteries in Tasmania are taxed at almost 80 per cent. In 2019-20, $40 million was raised from lottery turnover and that turnover was $53 million. $40 million was raised from $53 million. Think about that. That is the sort of return that you get from lotteries.
To serve up a tax rate of 0.91 per cent for keno and casinos, as this bill does, is utterly scandalous. Even the tax rate of 20.91 per cent in kenos for pubs is ridiculously low compared to lotteries, where both forms of gambling are essentially the same.
I propose that keno rates should be the same as EGMs in pubs and clubs. There is no sound reason for the tax rates proposed in this bill apart from the self-serving argument from industry about a North Queensland model.
Will player expenditure fall if tax rates rise? Of course they won't. For me, it is a simple proposition that a higher rate would be a more appropriate share for the community, which is, if I may repeat myself, one of the aims of the future gaming market reform and one of the objectives of this bill.
We should view the Community Support Levy through the same lens as we do gaming taxes. The Community Support Levy is for all intents and purposes a tax that has been hypothecated to fund specified programs, and essentially it is a feel-good arrangement.
The industry erroneously believes they carry the burden of the levy and feel a warm inner glow from funding harm minimisation in community support grants. The cold hard reality is that it is a tax that is funded by the players themselves. You don't pay Community Support Levy, you don't make money from players playing and losing money.
In any event, whether it is a tax or a levy, it is one and the same from an economic impact viewpoint. With that in mind, I am proposing that the CSL that will apply to EGMs in casinos, be the same as the EGMs in community pubs - a rate of 5 per cent.
With a few changes to licence fees, tax rates and levies, it will be possible to raise at least $30 million per year. I am not sure about you, but I can think of about 100 pressing ways to spend that, all in my electorate. All around the state, quite frankly.
Of course, Federal Hotels would be worse off. I absolutely acknowledge that. But pubs and clubs will still have higher profit margins from gaming than they do from any other activities, and much more than their colleagues in the food and beverage sector. That is why they put them in - more rooms, because it is a much more profitable use of the space.
For me, the proposal I have put to you is a far more appropriate sharing of the returns from gaming.
I will now speak more briefly about harm minimisation. I wish to make some points. This was a proposed amendment in this area as well.
Unless you have been living under a rock, you would know that pokies, or EGMs, when used as intended, are designed to be addictive and thus cause harm to some users. We do not allow many other things when their use is intended to harm people. Cigarettes are perhaps one example.
It is vital that a preventive public health approach is taken to respond to the risk of harm to all who use gaming machines. We must refrain from demonising those who are addicted to pokies, as the machines themselves are designed to be addictive. A preventive public health approach is needed for all who use gaming machines, not just those who experience harm.
I will reiterate some comments I previously made in an opinion piece published in The Advocate in January 2020. I say that these comments are just as true now as they were then:
Gaming machines are programmed to be addictive. The machines are programmed to disguise losses as wins. They are programmed to give small wins to keep people at the machine longer as they lose even more money. The machines use an unpredictable reward schedule, that means the time until reward or some return for money spent given is uncertain. This keeps people interested in playing, as they believe a big win can't be far away and therefore, they keep playing longer. The anticipation of a win is what triggers the release of the hormone dopamine. Dopamine is a neurotransmitter or a chemical that helps transmit signals in the brain. When dopamine is released into the brain, people and animals incidentally, anticipate reward, telling the brain that whatever just experienced is worth getting more of. Dopamine has a reinforcing effect and it motivates a person to do the same thing again and again and again. The release of dopamine makes a person feel good. We like that. The anticipation of a reward or win on the pokies is associated with feeling good and creates a high that can lead to addiction. Most people don't know or understand how addictive these machines are designed to be. They don't understand they're designed to ensure the player has regular releases of dopamine in anticipation of a win, rather than the win itself. It's the anticipation of the win that keeps them there, enhancing the addictive nature of the machines.
As I have stated, when used as intended, there is a real risk that users will become addicted very quickly. The machines are designed to maximise the amount of time and money people put into them. These design features can be removed. Sadly, the legislation before us fails to do this. Measures that must be included should be evidenced based, using a best practice regulatory framework for EGMs, including measures such as: cashless gaming machines and mandatory precommitment, which is already used in the premium player club programs or loyalty programs in the casinos; maximum $1 bets; slowing the spin rates of machines; and a review of the Responsible Gambling Mandatory Code of Practice to mandate staff to intervene when they see gambling harm occurring. That may be happening now in some places but I do not know that it is universal.
In addition, I am at a loss as to why we should introduce simulated horse and greyhound racing in pubs and clubs. Apparently, these look very real. I have not seen them, but I have been told they look like real horses and real dogs. I do not know why we need these in pubs and clubs and certainly, they should not be in family dining areas. It is obviously much cheaper than running the real thing around the track. The horses and dogs, the places they run, they are basically just a randomly generated set of numbers.
The amendment I will be proposing with regard to harm minimisation is to insert a new clause in section 112L(14) under relevant matter in the principal act, that is, to include provisions that enable the commission to consider the function and design features of the machines that can be addictive. I would like 'the harm or increase the risk of harm of users to gaming machines'. These are being done by OPC as we speak, and I know none of them have been circulated as yet.
The only other matter I wish to raise briefly in this speech until perhaps tomorrow, after I have had the briefing - I will not repeat all this again, rest assured - and will also raise more fully in the Committee stage, if and when we get there, is in relation to the exclusion of Tasmanian residents from participating in high-roller casinos. Seriously, I cannot understand this or the rationale behind this discriminatory provision. Cannot Tasmanians with independent means be trusted? Personally, I would have no intention of going into one of these places but I do not know where this -
Ms Rattray - You can go and watch.
Ms FORREST - You can go and watch but you cannot participate. I hope the Leader can enlighten me, as many I have spoken to about this provision are flabbergasted as the implications of such a provision and I cannot understand it. This seems nothing more than an attempt at a restriction of trade and forcing Tasmanians who want to go to a casino in Tasmania being only committed to the two Federal Group casinos.
Ms Webb - Surely, this Government would not restrict free choice? It is not free choice.
Ms FORREST - That is what the provision seems to be doing, that Tasmanians cannot go to a certain place in Tasmania.
Ms Webb - Restricting free choice.
Mrs Hiscutt - They can go there.
Ms FORREST - They cannot participate in an activity that anyone else from around the world or other parts of Australia can.
There are surprisingly some quite high-wealth individuals in Tasmania who may want to go and have a gamble. More power to them if they want to do that in a high-roller casino. Maybe, they might win but probably they will not, but I cannot see how this possibly passes the test of not discriminating against Tasmanian residents in their own state. It just does not make sense. Anyway, I will leave that to the Leader to enlighten me because I am sure she will be looking forward to doing that. She seems a bit confused herself about that.
I will speak more about the proposed request and amendments in the Committee stage and I am not sure this bill can be amended in such a way as to address the matters I have raised fully, but if it can it will be likely I will support it, even though my preferred option would have been to see EGMs removed from pubs and clubs and restricted to casinos. I have made that point publicly a number of times and everyone pretty much knows that is my view on this matter. But, we are where we are and I am happy to work through the process, but not to all stupid hours of the night, as I have already said, because I will not be forced into a position of making ill-informed decisions because of fatigue. We do not let health professionals do it and we should not. We do not let operators of machinery do it and depending on how sleep-deprived you are, it can be the same as being under the influence of alcohol and I will not work in this place under the influence of alcohol and neither should anybody else. The effect is the same with fatigue. If we are going down that path I will be getting out some more references about that.
I reserve my right to speak more tomorrow after the briefing. I elected to get up tonight and start this process after the Leader did her second reading speech because I was prepared to make these comments. There may be other comments I wish to make in the briefing; I may have said it all. I do reserve that right but in order for this bill to be supported, I am intending to support it into the Committee stage and remind myself and others that is highly complex legislation and, such as it is, it cannot be rushed and if it takes three sitting weeks to complete, then so be it. Getting it right is more important than getting it done.
Ms FORREST (Murchison) - Mr President, I move -
That the debate stands adjourned.
Motion agreed to.
Continued from 9 November 2021 (page 83).
Ms FORREST (Murchison) - Members can rest assured I will not be speaking for much longer. I had a fair crack yesterday, as you would say, and nothing has changed except a bit of light was shed in the briefings. I wanted to reiterate a couple of the points in summary. We need to remember the proposal here is, in some respects, not dissimilar to what Federal Group was granted back in 2003, a real sweetheart deal that for a long time saw significant financial benefit to them.
What we are seeing now is going to be apportioned between a small number of pub and club owners, mainly pub owners across the state, but in certain areas of the state. The distribution of the benefit is not even, and it certainly does not meet the objectives of the bill, as stated in part (c) of the objective, to share the benefits equally. It does not do that by any stretch in any way you look at it, it does not achieve that objective - and unless it changes significantly, it will not. Some pubs will have staggering doubling of their profits from already very profitable positions.
I find it staggering maybe people were not aware of this and it is why there has not been a lot of noise in the streets. People think it is breaking the monopoly, which I said is an absolute smokescreen. It is taking away that monopoly of the monitoring system. We would have been better to stick with that in a tightly regulated monopoly or oligopoly and have the benefits spread with tax rates fair, so the community, through the government, does get their appropriate share. This bill does not do that in its current form.
I hear people talking, even in our briefing today, about breaking the monopoly being the best thing since sliced bread - it is not. It is absolutely not. It is a smokescreen and a con when you are just shifting the benefit to some others. There will be pubs, like the one in the Leader's electorate, that will make an estimated $960 000 more in net profits and the school down the road cannot get a decent facility. That is every year, the benefits to that pub.
It is deeply concerning to me this model has been adopted and sold as a win for the people of Tasmania, a win for the pubs and clubs - that is absolutely true - and a loss for Federal - well, that is true, to an extent, but do not forget the Federal Group owns a lot of these best performing pubs. There might be losses in one part, but there will be benefits in the other.
I would have liked to have heard from the Federal Group today. I do not know why they were not here because they were being verballed or bad mouthed by the other sector of the industry and certain things were said about them and they had no right of reply. I have met with Greg Farrell and talked to him previously about this, as I will meet with anyone, generally, who wants to meet with me and I can fit it into the schedule. That has been grossly unfair in some respects - that they have been portrayed in that way when they are set to lose a significant amount - but it is almost like shifting it from one beneficiary to the other.
In summary, I found some of the answers this morning unhelpful but others were quite revealing.
When it comes to the core monitoring, the most definitive answer from the department was that costs would be about $2.60 per day per EGM - that is the core monitoring cost. That is about $1000 per annum.
For an average EGM with losses of $50 000 per annum, that might be 2 per cent but for a pub in Elwick it may only be 1 per cent in player losses. For a pub with EGM losses of $20 000 per annum, like in McIntyre or some in my area, it may represent 5 per cent, so a significant difference and not equitable, not shared evenly across the state. And it is almost certain to negatively impact on our smaller communities where the pubs are the heart of the community, are they not? Where people go; they meet there. It is often the only venue that is there to go and have a meal and catch up.
When the Labor Party came out with their election commitment to take them out of pubs and clubs I was publicly supporting that approach and I did get a bit of a hammering down parts of the west coast, 'What are we supposed to do now?'. I said, 'You can go to the pub and have a meal'. 'We do that anyway.' Fair enough.
If you make it a fair and equitable system but you take out the known harmful aspects of the machines, it does not matter. If you take away those mechanisms that harm people, it does not matter.
There are the regulator fees on top of the other fees that will be regulated for the other functions. I appreciate the list that was provided and the Treasury official spoke to us about. I think I understood correctly that this is likely to be between $100 to $150 per month or $1200 to $1800 per annum. This will be a set fee that will apply to all venues regardless of location. So the bigger pubs that are able to absorb some of those costs - that will be like a little blip in the ocean. For a pub in Elwick, say, it might be like a small beer to them but for some of the smaller ones, it might be 5 to 8 per cent of player losses so a significant impost on them and threatening the viability once you add all the other costs in - costs they do not yet even know.
Then, as I am alluding to, the market-based functions. I walked out of the briefings none the wiser of what these may cost. We also heard that there could be attempts of price gouging and the like and there are to be some mechanisms to try to prevent that but when you live on Flinders Island or King Island, no matter which way you cut it, it costs a lot of money to get there. So if you have to get there and service a machine or repair a machine or whatever, those costs will be the costs. For someone who tenders for that service, they may be able to apportion the costs across the whole state but that will remain to be seen and we do not know. That is the point - we do not know.
It seems we are being asked to approve a voyage into the unknown with so much of this. As I said yesterday, there may be times when the existing situation may be preferable to a voyage into the unknown. It may be better to tweak the current system rather than trying to pretend we are doing something really fantastic when we are actually creating inequitable benefits to a small group of people rather than just one.
I was staggered to hear the industry has no idea of what will happen to their existing EGMs if you move into the new arrangement. How much will Network Gaming charge them for their EGMs that they have already paid for, fully or in part, as they said? They talked about the difficulty they have had dealing with Network Gaming. We did not hear from Network Gaming to understand what their side of the story is. Where were they?
I noted the industry's comments that EGM financing will be harder for smaller venues, making them more amenable to offers of help from predatory service providers. There must be mechanisms trying to prevent that, but they are still going to be vulnerable, as I have said. I took special note of the statement that pub values would increase six or seven times the amount of an increase profits. It is good news for some pubs, is it not? If profits rise by $375 000 for an Elwick pub, as I pointed out yesterday, the value of that pub will increase by between $2.2 million and $2.6 million. Is that what the people of Tasmania are approving? Going into the election did they know that would be the outcome? This means also that if a pub owner sells up soon after this bill becomes law, the owners will walk away with a large bonus courtesy of this bill. That is what will happen, I believe, if we approve the bill in its current form. If someone could tell me I am wrong, I am happy to hear it.
I know we should all welcome extra capital spending in our community, but to be told that $25 million worth of projects are ready to go and/or are in the planning stage, and they are just waiting for us to approve this bill, was a little bit of a heavy hand for me. I am aware of lots of projects in my electorate that would love a government handout to help them get underway, lots of them. This is cherrypicking a sector of the industry or our community, that is already in a profitable position, some more so than others, as I pointed out. Some marginal.
Even just from the hospitality industry perspective, is it fair that a few pubs with EGMs get a massive boost compared with all the others in the hospitality sector? Those without EGMs are having to compete in the space with a pub down the road getting an extraordinary financial benefit courtesy of this bill, with licences that are effectively perpetual. Renewed within five years of the expiry date for another 20 years, not for another five years, when you have already made your initial investment - poker machines, done that - for another 20 years. It is a perpetual licence for 20 years. And if a pub sells, it is a new 20-year arrangement. So, it becomes staggered.
If we put this in place, this will be here forever, pretty much. It will be really hard to unwind if it is put in the way it is. So, I ask, is that what people in Tasmania really voted for? I hear all the bandaid arguments: people do not only vote on one issue alone, but I know this was a big issue. I acknowledge and accept that. But I do not believe this is what they actually voted for because they had no idea what this was going to look like when they voted.
To see some pubs in some areas do really well, potentially making a huge profit if they sell up, and even if they do not sell, getting enormous revenue by way of super profits if they are a high-performing pub in pokies profits. Others risk going out the back door, or need to get rid of pokies and rely on other hospitality services as these unknown costs may make them unviable. And we do not know what they are. They do not know what they are. So, I do not believe this is the case at all. I think the small pubs and clubs in the regions are already struggling at times.
Three or four years ago, the Wynyard RSL took the pokies out because they were losing money then. There were two aspects: they saw the harm and they were losing money, or certainly not making any money. It was totally marginal. The then-president, Trevor Duniam, a fine man, made the decision to take them out because of those two factors. They are small, marginal and there are lots of these in my electorate and other small regional electorates in our state.
I do not believe the proposed framework is fair or equitable, and certainly does not meet the objective of the bill. Can it be amended to see these matters addressed? I am not sure. I will listen to the views of others but I am not overly confident. As I said, it is more important to get this right - it will be here for the long term - than just to get it done. I will not sit late for unreasonable hours to achieve that.