Crown director reveals tax underpayment could date back to 2012

A recently appointed Crown Resorts director has told the Victorian royal commission into the embattled casino operator that the company may have been underpaying gaming tax to the state as far back as 2012, but did not act.

The Sydney Morning Herald reports that Crown director Nigel Morrison, who joined Crown’s board in March, said that a number of Crown’s directors were “shocked” that the company may have underpaid up to $272 million in gaming tax to Victoria.

“It tells you that they have an attitude that, if they didn’t think it was overly important and they could get away with it, they did,” Mr Morrison said.

The former senior Crown Melbourne executive and most of his fellow directors first learnt that Crown had been avoiding paying the tax through a deduction policy after the information was aired on June 7.

The inquiry into whether Crown should retain its Melbourne casino licence heard in May that the casino classified marketing costs such as free parking as a deduction from its gambling revenue in order to minimise tax it paid on its poker machines.

“The magnitude was unbelievable,” Mr Morrison said.

While the exact underpayment figure is up for debate, Mr Morrison said Crown’s chief financial officer Alan McGregor calculated the figure to be $8 million, but the inquiry has also heard estimates of $167 million, $200 million and $272 million.

Old board minutes reveal tax calculation discussion

Mr Morrison said Crown executive chairman Helen Coonan did not disclose to the board in June that she had been aware of the problem since February 23.

Company executives ordered a probe into the issue within 36 hours of the Victorian government announcing the royal commission in March.

Crown director Mr Morrison revealed he learnt of the issue in mid-March during a short conversation with Crown Melbourne chief executive Xavier Walsh, after Mr Walsh found minutes of a board meeting from 2012 at which the gaming tax calculation was discussed.

Mr Morrison said the 2012 board minute raised concerns in his mind that Crown did not have an “open and honest relationship” with Victoria’s gambling regulator at the time because “they were happy to proceed on this basis without making sure that the regulator was content with the calculation”.

Crown sought legal advice about the tax issue in 2018 because the company believed the Victorian casino regulator was “digging around”, the commission heard.

It was revealed in early June that Crown failed to disclose it had potentially underpaid the state government by claiming the perks it doled out to punters from its poker machine loyalty program as losses to reduce its tax bill.

This happened despite the commission specifically requesting the casino giant to point out any possible violations of Victoria’s Casino Management Agreement Act, which includes Crown’s tax obligations to date.

When asked hypothetically if he believed a director should resign for omitting to inform the board of a potential tax underpayment, Mr Morrison agreed that they should and that he would not serve on a board with a director who had acted that way.

Commissioner Ray Finkelstein also gave more details on Tuesday about Crown’s breach of Victorian gaming laws, disclosed earlier in the inquiry, by allowing foreign high-rollers to transfer money through a Hong Kong credit card account to Crown’s Melbourne hotel and then use that money to gamble.

Commissioner Finknelstein said it is believed $160 million was transferred between 2012 and 2016 in what could also be a breach of other legislation and criminal laws.

Crown employees will give evidence about the practice in a private hearing before public hearings resume.