Star Entertainment unhappy with proposed casino tax hike
Star Entertainment Group experienced a 15% drop in its share price on Monday, shortly after NSW Treasurer Matt Kean announced that the company’s Sydney casino would have to pay hundreds of millions of dollars more in taxes to continue its poker machine and table game operations.
Kean revealed that he intended to raise an additional $364 million from Sydney’s two casinos — The Star Sydney and Crown Sydney — within the next three years ($120m yearly). This will contribute to the wellbeing of communities in the state suffering from floods, bushfires, and the aftereffects of the pandemic.
Prior to the announcement, Star Entertainment was on a lower tax rate for poker machines than NSW-based clubs and pubs. The tax increase is also in line with the law passed in Victoria during the state’s recent yearly budget. The NSW law will come into effect on July 1, 2023.
“It’s important that casinos pay their fair share of tax. These reformed tax rates will replace the existing regime under which casinos pay less tax on poker machines than hotels and clubs,” Kean said.
The new tax proposal comes amid heightened efforts by state regulators to reform the gambling industry. Over the past months, there have been repeated reports of Australia’s most prominent casino operators being involved in money laundering, poor corporate culture, and dysfunctional governance.
NSW Premier Dominic Perrottet also recently revealed that he intended to make all 95,000 poker machines in the state cashless. The proposal is one that several powerful lobby groups in the state have long opposed.
READ: Pokies reform battle heating up in NSW
Following the announcement of the proposal to increase taxes for casinos, the CEO of Star Entertainment Group, Robbie Cooke, slammed the NSW Government’s decision. He claimed that the Star was already paying a suitable amount to the government.
Besides the increased taxes, Star Entertainment is currently paying off a $100 million fine the NSW Independent Casino Commission (NICC) imposed on the casino operator.
The Queensland Government also fined the company a separate $100 million regarding governance issues at The Star Gold Coast and Treasury Brisbane. The fines were issued after NSW’s Bell inquiry and Queensland’s Gotterson review both found Star unsuitable to have a casino licence. The casino operator will reportedly pay off the fines in three tranches.
Cooke queried the government’s decision, highlighting a lack of consultation with the gaming industry before passing the increased tax mandate.
“We are not sure how the government modelled its financials, nor the basis for suggesting The Star does not pay its fair share of taxes,” Cooke said.
“Specifically, in addition to state gaming taxes, The Star also pays millions in corporate taxes, with total taxes paid as a percentage of The Star’s profits being around 70 percent, and as high as 80 percent in the last five years when all the tax regimes are considered.”
Star Entertainment announced that it intended to set up a meeting with the NSW Government to discuss and point out the unsustainability of the proposed tax changes. The gaming operator revealed that the proximity of the new law with the ongoing reforms in Star in the aftermath of the Bell inquiry was also concerning.
Star Entertainment is well on its way to implementing carded play and cashless gaming in its venues to discourage money laundering and protect its gamblers. Under the supervision of the external manager Nicholas Weeks, the Australian gaming giant has begun an extensive remediation program to prove that it is suitable to hold a casino license.
READ: Star Sydney to operate under special manager during suspension
Weeks was appointed by the Queensland Office of Liquor and Gaming Regulation earlier this month to oversee Star’s remediation program in Queensland. He was initially meant to remain on seat for 90 days; however, according to a recent announcement by the casino operator, Weeks will continue with the gaming operator until January 19, 2024.
“No other details have been made available in relation to the potential reforms (including as to how the taxes would be levied or applied). There has been no consultation from the NSW government with The Star on this matter,” the statement continued.
If passed, the proposed tax regime will take the place of Star’s 2020 agreement with the state that extended till 2041, which allowed the company to save over $1 billion in tax. Star’s Sydney casino license suspension rendered the agreement void.
Crown Resorts, currently owned by private equity giant Blackstone, also commented on the tax increase. The company stated it was reviewing the details of the changes and expected more information from the government.
“The impact of these changes will depend on the final details of the tax and other pre-existing arrangements we have in place at Crown Sydney,” a Crown spokesperson said.
In addition to its issues, Star Entertainment is currently facing a lawsuit filed by ASIC which involves 11 past and present executives in the company. The regulator, via the suit, claimed that the involved executives had breached their duties during their time at Star.
