New Victorian tax calculation could hurt Crown’s pokies dollars

The Victorian government’s calculation of a higher tax rate for Crown’s Melbourne 2600 poker machines has been questioned by the casino operator.

The Australian Financial Review reports that Crown said the tax could reduce its earnings by between $35 million and $40 million, based on 2019 earnings.

The Victorian government said the proposed tax increase, outlined in the recent state budget, is expected to generate up to $30 million a year.

Crown said it has held discussions with the Victorian government, seeking to clarify the proposal and “has looped in” Blackstone as the potential new owner of the casino if the $8.9 billion takeover deal is signed off by shareholders this month.

The tax increase, slated to take effect from July 1, 2023, will mean Crown pays the same rate of tax on revenue from pokies as clubs and pubs.

The Victorian government had been unable to hike taxes on pokie turnover without having to pay up to $250 million in compensation due to a Napthine government agreement with Crown in 2014.

But following the damning Finkelstein royal commission into Crown, which fell short of ripping up the casino licence, the state government passed laws cancelling that compensation clause.

Crown pays flat tax rate compared to sliding scale at pubs and clubs

Crown pays a flat rate of 31.57 per cent plus a community benefit levy of one per cent, whereas pubs and clubs pay on a sliding scale per machine.

The Victorian proposal means Crown will pay 47.6 per cent on a machine generating $2666 to less than $6666.67 in turnover, on a sliding scale to the top rate of 60.67 per cent on a machine that generates more than $12,500.

Crown told the market that the impact of the tax changes on earnings would depend on “the final details” of the tax and the revenue generated from pokies at Crown Melbourne.

“Noting the government is committed to the implementation of this measure, the government and Crown intend to establish a working group to further consider the implications for Crown and the process of implementing the changes proposed by the government, which will require legislation,” Crown said.

Funds in state budget allocated to special manager and new casino regulator

The royal commission found Crown unsuitable to run the casino but allowed it two years to clean up its act, under the supervision of a powerful special monitor, Stephen O’Bryan QC.

Most of the $55.6 million allocated in the state budget has been set aside for the monitor, with the remaining funds allocated to implement the recommendations of the royal commission.

That includes setting up the new state casino regulator, the Victorian Gambling and Casino Control Commission, with specialised staff and dedicated casino commissioners.

“We’re getting on with delivering the reforms and investments needed to strengthen oversight of Crown and the whole Victorian gambling industry, with a focus on harm minimisation,” Minister for Gambling and Liquor Regulation Melissa Horne said.

Blackstone’s $8.9 billion takeover of Crown Resorts was recently delayed after state-based casino regulators put back the shareholder vote by three weeks to allow more time to vet the US private equity giant.

Mr Packer and the remaining 62 per cent of the shareholders were set to vote on the scheme in late April, but Crown told the market the date has been pushed back to May 20.

The NSW, Victorian and West Australian casino regulators are assessing whether the US money manager is suitable to operate Crown Melbourne, Perth and a proposed Sydney casino in the $2.3 billion Barangaroo tower on the harbour.

Blackstone and Crown poured cold water on fears the deal was in trouble, citing the complexity and scale of the regulatory requirements.