South Australia Proposes New Gambling Tax Inside Borders

South Australia is attempting a move that no other jurisdiction in Australia has tried yet: The state has decided to tax online gambling companies on revenue they earn inside state borders. While this may not sound like a huge burden on an industry that earns $10 billion a year, it has stirred up quite a bit of controversy.

The tax, called a “place of consumption” tax, would be the first interstate gambling tax. According to the South Australian government, it is intended to leverage a portion of the significant profits that flow out of the state and into other jurisdictions every year. It is expected to earn South Australia a whopping $9.2 million per year from companies located both in the state and outside of the state’s borders.

The Reasoning Behind This Tax

The 15 percent wagering revenue tax is intended to hit online gambling providers that have intentionally based their businesses in other jurisdictions with lower tax rates in order to avoid heavy taxation. South Australian treasurer Tom Kousantonis has stated:

“The betting industry is rapidly changing and our tax regime needs to change with it. If betting companies are making profits from South Australian punters they should be paying tax in South Australia, not in whichever jurisdiction their head office and servers happen to be located. By implementing a wagering tax based on the place of consumption, we are ensuring that businesses are paying taxes in the jurisdiction in which they are making their money.”

Controversy Surrounding the Tax

There is a very vocal campaign lobbying against the South Australian tax, and many of its major players are owned by multinational corporations based in offshore tax havens. One of the most prominent leaders of this opposition is Ian Fletcher, the chief executive of the Australian Wagering Council. The Australian Wagering Council is a lobby group for the corporate bookmakers that has been contributing considerable time and funding to turn South Australian residents against the proposed tax.

Players and businesses against the tax have begun to refer to it as a “punter’s tax,” and advertisements paid for by dissenters claim it is delivering, “worse odds, less promotions and less money in your pocket.” These and other full-page advertisements in various newspapers are being paid for in hopes of flooding the government’s offices with calls to do away with the tax before its scheduled implementation next July.

Why Some Believe the Tax is Necessary

Those in favor of the consumption tax believe that this type of approach is long overdue. Organizations like Clubs Australia have called it a welcome, “sensible and proactive approach to making sure online betting companies pay a fairer share of tax.”

The most frequently cited example of online gambling companies getting out of paying a “fair share” of taxes points to online wagering operators that are located in Australia’s Northern Territory. Online operators generated roughly $9.7 billion in the previous fiscal year, yet only paid out $7 million in wagering taxes. In contrast, licensed operators within South Australia’s borders would have been taxed $200 million for the same level of turnover.

Supporters of the tax, like South Australian senator Nick Xenophon, agree with the sentiment that businesses which make money in their jurisdiction should be responsible for tax contributions to their jurisdiction. In fact, Xenophon has has been quoted saying that South Australia now represents “a key battleground” on this matter. He also believes that these online gambling corporations should be contributing a “significantly larger slice of additional revenue” that would be slated for gambling rehabilitation, citing research that claims 90 percent of gambling addicts never get treatment.

The tax is set to go into effect July of next year, which means there could potentially be a long, drawn-out battle between sides for the next 10 months.