LEGISLATIVE ASSEMBLY OF THE NORTHERN TERRITORY
SELECT COMMITTEE ON
EFFECTS OF POKER MACHINES IN COMMUNITY VENUES
REPORT
FEBRUARY 1995
TABLE OF CONTENTS
Chapter 1: INTRODUCTION 1.1 Appointment 1.2 Terms of Reference 1.3 Approach
Page
5 5 5 5
Chapter 2: BACKGROUND 7 2.1 Definitional 7 2.2 Current Pattern of Gaming in the Territory 8 2.3 Essential Parameters in Expansion 8 2.4 Announced Government Predisposition 9 2.5 Activity of the Committee 10 2.5.1 Gathering Information Within the Territory 10 2.5.2 Gathering Information Interstate and
Overseas 11 2.5.3 Written Submissions Received and
Documents Consulted 11 2.5.4 Reports and Other Material Considered 11
Chapters: SUMMARY AND RECOMMENDATIONS
Chapter 4 REGULATORY DESIGN
4.1 Regulatory Background and Objective 4.2 Patron Benefit and the Tax Basis 4.3 Community Benefit
4.3.1 Location & Economies of Scale 4.3.2 Machine Taxation
4.3.3 Machine Ownership 4.3.4 Machine Allocation
4.3.5 Professional Club Management 4.4 Government Benefit
4.5 Machines in Hotels
13
17 17 20 22 22 24 26 29 31 34 34
Chapter 5: PERSONAL, SOCIAL AND ECONOMIC CONSEQUENCES 39 5.1 Assessment Considerations 39 5.2 Player Profile 40 5.3 Personal and Family Consequences 42 5.4 Social Consequences 46 5.5 Economic Consequences 47 5.5.1 Government Revenues 48 5.5.2 Club and Hotel Revenues 48 5.5.3 Employment 48 5.5.4 The Northern Territory Economy 49
Chapter 6:
Chapter 7:
MITIGATING THE NEGATIVE IMPACTS 6.1 Machine Controls
6.1.1 Machine Numbers 6.1.2 Machine Types 6.1.3 Machine Limits
6.1.4 Future of Old Gaming Machines 6.2 Venue Operational Controls
6.3 Consequential Services Provision 6.4 Community Education
6.5 Research
ENSURING FAIRNESS, EFFICIENCY AND INTEGRITY
7.1 Regulatory Control 7.2 Regulatory Efficiency 7.3 Fairness
7.4 System Integrity
7.4.1 Effective Legislation
7.4.2 Venues, Managers and Special Staff 7.4.3 Inspection and Audit
7.4.4 Monitoring
7.4.5 Software & Hardware Testing 7.4.6 Manufacturers
7.5 System Efficiency
7.5.1 Machine Efficiency 7.5.2 Industry Training 7.5.3 Future Flexibility
53 53 53 54 55 55 56 58 60 60
65 65 65 66 67 67 67 68 69 71 72 72 72 73 74
Chapter 8: ACKNOWLEDGMENTS
APPENDICES
A. Distribution of Draw Card Machines at Present
B. Witnesses Who Gave Evidence to Members of the Committee in Public and Private Meetings.
C. List of Written Submissions to the Committee D. Documents Consulted by the Committee E. Membership of the Committee
75
77 78
80 87 88 95
Chapter 1
INTRODUCTION
1.1 Appointment
On 13 October 1994, the Legislative Assembly of the Northern Territory established a select committee to examine the effects of introducing poker machines into community venues and associated issues and to report to the Assembly in February 1995.
1.2 Terms of Reference
The Committee's Terms of Reference are to inquire into and report on:
(a) the personal, social and economic consequences for individuals, families and the community at large from the availability of Poker Machines in community venues;
(b) the means by which any negative impacts of Poker Machines in community venues can be minimised;
(c) the form and extent of regulatory mechanisms, covering the positioning, ownership, operation, and control of Poker Machines in community venues, necessary to ensure that fairness, efficiency, and integrity are maintained.
1.3 Approach
The Committee took evidence from interested individuals and organisations in all of the main centres of the Territory, both by arrangement and in accordance with a published schedule.
It also met with the responsible Ministers in South Australia and Tasmania, and took evidence from government regulators, academic staff with research projects in this field, welfare agency directors and clients, and Poker Machine industry representatives in Brisbane, Sydney, Adelaide, Melbourne, Canberra and Hobart. Their cooperation, both in terms of experience shared and material provided, was fulsome.
This report reflects the input from all of these sources. Without their generosity our task could not have been completed satisfactorily in the allotted time.
Chapter 2
BACKGROUND
2.1 Definitional
For the most part Poker Machines are played by individuals for entertainment, buoyed along by occasional wins and the chance of a substantial winning combination. Players are content to buy leisure time in front of the machine.
Over a long cycle of plays each Poker Machine holds on to a factory set percentage of turnover. This activity is taxed by the State or Territory Government concerned, and the balance accmes to the machine operator, usually the venue proprietor.
Some definition of the following terms will assist in understanding this report.
Poker Machine is a mechanical or electronic gaming machine accepting a succession of wagers of one or a multiple of credits for the chance of achieving preset or illustrated win combinations and allowing withdrawal of the net proceeds at any time in cash.
Draw Card Machine is an approved gaming machine currently installed in certain clubs and hotels in the Northern Ten-itoiy and in respect of which withdrawal of net proceeds is lawful only in goods supplied by that venue.
Turnover is the accumulation of amounts wagered; for example, five 20 cent credits bet on a Poker Machine produces a Turnover of $1, irrespective of the result of the spin or game.
Player Loss is the net amount of money lost by players on the machines. It is interchangeable with the "Gross Profit" of machines or "Net Revenue" from players in the venue. Player Loss is the preferred term in this report, as it avoids the possible interpretation of capital or other deductions being applied to determine profit or revenue.
Tokenisation is where multiple credits appear on the machine when a larger denomination coin or note is inserted, eg, ten x 10 cent equivalent credits for a dollar coin.
2.2 Current Pattern of Gaming in the Territory
There are two licensed Casinos in the Northern Territory, Diamond Beach Hotel Casino in Darwin and Lasseters in Alice Springs, each having an exclusive right within its respective Division of the Territory to offer forms of gaming which are otherwise illegal.
The Divisions are bounded by the eighteenth parallel of latitude (north ofTennant Creek, so that centre is in the southern Division). According to the latest available population estimates, 129 000 people live in the northern Division and 40 100 in the south.
Each Casino has had Poker Machines from the outset. Diamond Beach now has 342 machines and Lasseters 188.
Even before the advent of the casinos, there were Draw Card Machines in clubs. Because of the gaming exclusivity arrangements written into the agreements with the casinos, these machines have been restricted to allow payouts only in goods available in the venue and to feature video card games rather than depiction of reels. They are not taxed.
In November 1990 the same gaming arrangement was extended to hotels, but with application of a tax of 6% on Turnover, half of which is paid to local sports and community groups on the recommendation of the respective hotels.
The location and usage of these Draw Card Machines is shown in the tables at Appendix A.
There is clearly a vast difference in the popularity of the 360 or so machines in the various venues: in fact, only 23 of the 77 venues achieved a profit of more than $25 per machine per day.
The Amhem Club is almost in a league of its own in these tables. That Club has achieved its position both through the nature of the community it serves and by devising a system of house currency to store accumulated winnings for redemption via both stock and a variety of agency services.
The impact of the switch to Poker Machines on venues havmg an investment in Draw Card Machines, and measures for its amelioration, have been raised as issues before the Committee. These issues are tied also to the .future of the agents in the Territory who supply those machines under lease to those venues.
2.3 Essential Parameters in Expansion
Agreement has been reached between the Northern Territory Government and the two Casino operators for a range of legislative and contractual amendments affecting their businesses through to a common licence expiry date of 30 June 2003. One result of these changes is that the Casinos will lose their exclusivity in respect of Poker Machines from
1 July 1995. The changes are to be formalised in legislation.
Bound into these arrangements are parameters for the introduction of Poker Machines in community venues. These were announced by the Treasurer in the Legislative Assembly on 13 October 1994 as:
Limitation of machine numbers.
• A maximum of 500 in the northern Division (260 in year 1).
• A maximum of 180 in the southern Division (90 in year 1).
• More machines may be allowed by subsequent agreement between the Government and the Casino operators, after consideration of issues such as the balance of community benefit and the effects on casino profitability.
Distribution of machines.
A ratio of 80% in Clubs and 20% in hotels.
Monitoring.
On-line government monitoring and deductions processing for all machines Compensation to Casinos.
2.75% of the Turnover of machines in community venues will be remitted to the respective casinos until 2003
2.4 Announced Government Predisposition
The Treasurer has also announced government policy predisposition in a number of associated areas which have a bearing on the introduction process for community venues and for the review now conducted. These include:
• strict manufacturer pre-qualification;
• licensing of all people associated with machine operation and maintenance;
• government ownership of machines;
• machines leased impartially to venues at a monthly rental of $250 (indicative);
• mamtenance of machine electronics only by government contractors;
• some distribution priority to venues now having non cash paying gaming machines;
• tax on community machines at 3.75% of Turnover;
• community Fund Levy of 3% of the Turnover of machines in Hotel venues;
• machines set to provide a minimum return of 88%;
• audits to reconcile central and venue records and accounts;
• the Community Fund will cater for services to problem gamblers, charities who may suffer some decline in donations, sports not benefiting from enhanced club revenues, and recreation and social programs.
Other general statements covering the background to the decision are contained in the Ministerial Statement made by the Treasurer on 13 October 1994.
2.5 Activity of the Committee
2.5.1 Gathering Information Within the Territory
The Committee held meetings by appointment and convened publicised public meetings in Darwin, Alice Springs, Nhulunbuy, Katherine and Tennant Creek. Interest as reflected in attendances was patchy (see Appendix B). Whilst the government decision to introduce Poker Machines had been covered extensively in the media there was frequent expression of disappointment that the details of the arrangements with the casinos in exchange for their loss of exclusivity as well as general information on alternatives available during the introduction phase were not available in sufficient detail to generate comprehensive community input to the Committee.
Copies of speeches and announcements have been available through the offices of the respective MLAs throughout the Territory and to some extent the apparent information vacuum has been caused by iaactivity by the clubs and others, individually and collectively.
The community feedback on social, economic and regulatory issues was limited in these imtial meetings, but the meetings did allow for the dissemination of information. This, together with the extension of time in some cases for the presentation of written submissions, allowed as mucfc community response as was available within the available time.
Some criticism of the government's failure to consult the community before deciding to widen the distribution of Poker Machines beyond the Casinos was voiced by church aud welfare rqn-esentatives seeking to have the decision reversed. Others complained of the ambitious target date for the start of Poker Machine installation and of the short time given to this Inquiry.
Representations were also received from those who consider that the compensation payable to the casinos for the relinquishment of their right of exclusivity is either too generous or should not be drawn from the new Poker Machine venues. The restriction on the number of Poker Machines and their split between clubs and hotels also drew criticism.
These decisions are not for review by this Select Committee. The Committee's role is ultimately to report to Parliament on an appropriate implementation strategy given the impacts it detects. There is some parallel here with the position of Sir Laurence Street, AC, KCMG, when faced with similar representations during his Inquiry into the Establishment of Legal Casinos in NSW. He said in his report:
"The inquiry was appointed by the Government to investigate and report objectively on the social, economic and tourist implications of introducing legal casinos and on the adequacy of the principles in the proposed Bill from the
criminological point of view. It is the province, as well as the responsibility, of Parliament to decide -whether or not legalised casinos should be introduced along the lines of the Bill. I was neither invited, nor would I have accepted an invitation, to intrude my own views into the determination by Parliament of this ultimate question."
Although this Select Committee is formed by the Parliament itself, its activity is also restricted to particular issues. Our collective response to approaches as to the ultimate parliamentary decision on the issue, as distinct from what may be our individual positions as Members of the Parliament, is the same as that adopted by Sir Laurence Street.
2.5.2 Gathering Information Interstate and Overseas
The Committee or Committee Members made visits to Australian and overseas
jurisdictions having or contemplating community based Poker Machines and met a broad cross section of industry participants, including Government Ministers, regulators and service providers, club and hotel associations, venue operators, machine operators, welfare agencies, electronic monitoring organisations, suppliers, researchers and addicts. Material was readily shared and opinions frankly extended.
Details of participation in these meetings are included in Appendix B.
2.5.3 Written Submissions Received and Documents Consulted.
Written submissions to the Committee are listed in Appendix C and documents consulted are listed in Appendix D.
2.5.4 Reports and Other Material Considered
The Committee's attention was drawn to the Review of Electronic Gaming Machines in Victoria, April 1994. The report of that Review contains material and analyses relevant to thislnquiiy1.
Two milestone studies conducted for the Queensland Government into the impact of the introduction of Poker Machines in that State also provided useful guidance. One is the Social and Economic Impact Study (first year), the other the stady of the effects on Charitable Fundraising.
Referred to in this report as the Victorian Review Report, April 1994
Chapter 3
SUMMARY AND RECOMMENDATIONS
The Committee is charged with predicting the consequences of the extension of Poker Machines into community venues, with showing how adverse impacts can be lessened and with describing an appropriate and proper regulatory system.
This report contains current information, including research fmdings, about the operation of Poker Machines across the various jurisdictions in Australia. It also describes the circumstances in the Northern Territory into which the Poker Machine initiative must meld.
The resultant recommendations, which are listed hereunder, recognise that the Temtoiy will have to cope with its own environment in its own way. Valuable guidance shines through from the State systems, but it is not possible to create the strategic framework anticipated by the Terms of Reference by adopting one of those systems or by formmg an institutional alliance with one of their participants.
The recommendations of the Committee are, in order, as follows.
1. The regulatory system for the Territory should be designed to meet its own circumstances (Chapter 4.1).
2. The primary objective in extending the distribution of Poker Machines in the community should be explicit, ie, to provide a productive local leisure activity, delivering proceeds:
• to clubs, to improve neighbourhood recreational amenity, and
• to government, for services to all Territorians (Chapter 4.1).
3. A comprehensive review of the Poker Machine industry in the Northern Territory should be conducted in 1998 (Chapter 4.1).
4. Tax should be levied as a percentage of Player Loss rather than of Turnover (Chapter 4.2).
5. The tax rate on machines in clubs should be reduced to 25% of Player Loss (but preferably to 20%) and the clubs should be relieved of the machine cost
(Chapter 4.3.2).
6. The Government should
• remain the legal owner of the Poker Machines in community venues; and
• actively manage the placement of its machines, as far as possible according to the needs of each venue (Chapter 4.3.3).
7. Poker Machine distribution to clubs should be made objectively, according to a plan which optimises benefit in terms of the primary community benefit objective (Chapter 4.3.4).
8. Relatively unproductive machines must be relocated after a reasonable review period (Chapter 4.3.4).
9. A Poker Machines Board, comprising the heads of the Racing and Gaming Authority, the Treasury, the Department of Health & Community Services and the Commissioner of Police, should be established in the legislation to
• acquire, maintain and dispose of Poker Machines;
• contract with venues for the positioning and care of machines;
• allocate and review the allocation of machines in each venue; and
• make full public report of its actions and any appeals thereof (Chapter 4.3.4).
10. A club venue applying for an eligibility licence for Poker Machines must have a current liquor licence and, if the total number of machines is ten or more, then it must also be incorporated under the Corporations Law (Chapter 4.3.5) 11. Priority for the distribution of Poker Machines to clubs should be determined
on the basis of both an analysis of the application itself and of a comprehensive business plan (Chapter 4.3.5).
12. The tax rate on machines in hotels should be reduced to 25% of Player Loss (but preferably to 20%) and the hotels should be relieved of the machine cost
(Chapter 4.5).
13. The initial allocation of Poker Machines to clubs should have regard for their capacity to meet ongoing financing commitments entered into with reliance on revenue from superseded Draw Card Machines (Chapter 6.1.1).
14. A maximum of six Poker Machines be authorised in any hotel (Chapter 6.1.1).
15. There should be a game limit of $2.50 on community based Poker Machines (Chapter 6.1.3).
16. (a) The licence for Draw Card Machines remaining in clubs should lapse on the date of effect of the respective venue's Poker Machine operations or on 1 July 1998, whichever comes first.
(b) All Draw Card Machines should be made subject to a tax of 3% of Turnover in the form of a Community Benefit Levy from 1 July 1995 (Chapter 6.1.4).
17. Rules covering machines and machine area use, security and dispute resolution should be displayed and enforced, and credit must not be allowed (Chapter 6.2).
18. Clubs should be required to disclose the flows of funds derived from members and the community, and their break-up, in a simple and uniform manner (Chapter 6.2).
19. (a) The Community Benefit Levy should be administered by an Inter- Departmental Committee, under published criteria and with its flows publicly reported.
(b) A base line study into the extent and e.ffects of gambling should be commissioned forthwith as a charge against these funds and a rehabilitation network should be designed using the results of this work.
(c) Those rehabilitation services should be contracted out after public tender (Chapter 6.3).
20. A community education program about gambling and sensible family budgeting should be designed and promulgated as a cross-cultural initiative, and contacts for counselling services displayed at all Poker Machine cash desks (Chapter 6.4).
21. The Department of Health and Community Services should initiate a baseline study of the extent and impact of gambling on individuals and families in the Northern Territory, as well as a social and economic impact study into the effects of Poker Machines once they are operational in community venues (Chapter 6.5).
22. A single regulatory authority should be formed by the amalgamation of the Liquor Commission and the Racing and Gaming Authority (Chapter 7.2).
23. For the reassurance of players, Poker machines should be badged as being the property of, and centrally monitored by, the Northern Territory Government, and as returning at least 88% to the player over time (Chapter 7.3).
24. Managers and technical employees and floor operators' licenses should be open ended and subject to cancellation on conviction for certain classes of offence.
Lower levels of venue employee should not be fingerprinted (Chapter 7.4.2).
25. A staff training strategy should be developed as a joint effort between the hotels and club Associations, the casinos, the Racing and Gaming Authority and TAPE representatives (Chapter 7.4.2).
26. External auditors of licensed venues must immediately report accounts irregularities to the regulatory authority (Chapter 7.4.3).
27. The Northern Territory Treasury should operate a stand alone dial-up electronic Poker Machine monitoring system suitable for local conditions (Chapter 7.4.4).
28. The regulatory authority should be responsible for testing and approving all machines and ensuring their integrity (Chapter 7.4.5).
29. Expressions of interest should be called for the maintenance of Poker Machines under contract, in anticipation of the eventual tender process (Chapter 7.5.1).
30. To ensure flexibility the Poker Machines Board should adopt a conscious risk management strategy for the acquisition, updating and replacement of its machines (Chapter 7.5.3).
Chapter 4
REGULATORY DESIGN
4.1 Regulatory Background and Objective
There are quite fundamental differences in the regulatory systems surrounding Poker Machines in the States and the ACT. These arise out of deliberate and quite different policy objectives, founded in historical and cultural differences as well as unique economic and political pressures and realities.
For example, Queensland introduced Poker Machines at a time when the finances of most of its incoqwrated associations were parlous and when associated sports and activities were suffering. They also had a cross border leakage problem (as did Victoria) into NSW.
Queensland was unique in that casinos were operating there at the time. Introduction required care so as not to disturb the casinos' position in tourism and as a revenue source.
The high tax/levy mix, particularly for hotels and based on machine Turnover rather than gross profit (Player Loss), drove down the player return in all new venues and reduced competition with the casinos.
The tax system also allowed the Queensland government to give a direct boost to
community welfare rather than relying on the goodwill of the venues in possession of new funding. The stated objective of improving facilities in clubs was achieved not only by allowing them to keep much more of the profit than the hotels, but also by limiting the number of machines in hotels.
NSW and the ACT allow the venues to keep much more of their Poker Machine profits (Player Loss) than anywhere else. Their clubs are advantaged even more than figures indicate because hotel machines can have card games only, they are hopperless (credits cannot be redeemed direct from the device) and there are limitations in hotels on the number of machines allowed (10), on the credits bet and on the jackpots offered. This advantage has led to the evident and sometimes spectacular success of clubs.
Victoria chose an even handed approach between hotels and clubs, one driven more deliberately towards revenue maximisation. Its system licenses two firms to own and operate Poker Machines and to take a third of machine revenue (Player Loss). This causes aggressive competition in venue .selection and promotion. The government takes a greater share of revenue than in NSW, at the expense of the venues. The government is also placed to extract large up-front premiums for term licences to operators. Hotel venues contribute a proportion of their returns to a community fund.
South Australia, now in the process of installing Poker Machines, has not differentiated between hotels and club venues. This is likely to give hotels, with generally more
professional full time management, a commercial advantage which the clubs will find hard
to overcome.
In Tasmania, the framework to be implemented reflects the agreement reached with Federal Hotels that they will own and operate machines in community venues and pay a stated proportion of revenue earned to the venues. This agreement was necessary because of exclusivity clauses in the agreements covering the operation of casinos in that State.
Every system has its own pattern of social and economic impact, so it is not possible to generalise about the effects of the introduction of Poker Machines into community venues.
Consequently, the Committee had to anticipate the probable shape of the Northern Territory system. This meant that it had to consider its regulatory reference first.
The background influences to system design for the Northern Territory produce a unique circumstance. Such factors include:
• the agreement to compensate the Casinos for the time being;
• a finite limit to the number of machines to be allowed;
• pre-existing public familiarity with Poker Machines in Casinos in the major towns;
• Draw Card Machines present in clubs and hotels; and
• long-standing government policy to strengthen clubs as social venues.
They combine to create an environment into which it would be very difficult simply to import one of the existing State systems.
This led the Committee to its first and fundamental recommendation.
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In order to come to grips with system design the Committee had to be quite precise in its interpretation of the objective of Government in allowing the introduction of Poker Machines into community venues.
There is a long and bipartisan thread to the policy of strengthening clubs in the Northern Territory. Generous allocations of land have been made to them in all centres for construction of premises and facilities. Grants, for both capital and recurrent purposes,
are made to clubs each year as a means of promoting general club activities and for the encouragement of sport in particular.
The proceeds from Poker Machines to clubs will augment their internal capacity to fund these activities, and to provide better surroundings and services, in direct proportion to the extent that they are used. A proportion of club members will devote regular blocks of their leisure time to this activity, provided they perceive value-for-money entertainment.
These fundamental concepts are discussed later in Ihis report.
The extension of Poker Machines into community venues has been interpreted by the Committee as a deliberate move to strengthen the club indusby and to derive a State-like revenue flow to give it the capacity to fund State-like services to all Territorians. The Committee would have reached different conclusions in a number of respects had the principal objective of Government been seen as, say, "maximisation of tax revenue" or "more widespread public access to recreational gaming product".
As there is potential ambiguity, the Committee believes that decisions to be taken in both the consideration of this report and in the implementation phase will be more soundly reached if put in the context of an explicit policy objective. That objective would then be included in the preamble of the regulatory legislation to reinforce its intent. The following recommendation establishes this objective.
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Creation of employment, tourism development, social and economic impact mimnusation (including the installation of some machines in hotels) and sporting development are all subsidiary amis within this objective.
Formal recognition of this objective, or of any other for that matter, has strategic implications, most significantly for the tax regime, but also for the distribution of machines.
Given the polarisation of some views expressed to the Committee and the range and extent of vested interests in the outcome of this Inquiry, it is quite clear that any rationing or concentration of Poker Machines, or changes in the delicate market relationship between
clubs and hotels in pursuit of this objective, will draw negative comment from some quarter.
Also, there will be those who will represent that the controls recommended to be implemented to ensure probity are too onerous and should be relaxed or at least phased out, and others who will claim to have earned' "rights" in the gaming arena, including rights to compensation or to some different tax impost, which have to be recognised.
In anticipation of these representations it is proper to include a reminder that:
1. legalisation of gaming creates strong and selfish interest groups;
2. the government's position of responsibility and accountability for probity and fairness must be paramount and unambiguous; and
3. licences to operate in the field of legal gaming represent revocable privileges, not rights.
The Government has all the powers necessary to ensure its objectives are met and this report continues on the assumption that they will be used. This imperative is considered also in Chapter 7 of this Report.
The recommendations of this Inquiry are designed to produce a sound footing and the desired direction for the industry. There is, however, no means of assuring that its objectives, including those for the mitigation of negative impacts, will be met. A review and retuning process will be important. Announcement of this review mechanism will allow participants to make adequate preparation and provide a forum within which the ongoing social and economic impact study, recommended later in this report, can be considered.
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4.2 Patron Benefit and the Tax Basis
Only a small minority of the community will play Poker Machines regularly as a leisure activity.
Most players realise that, at least collectively, they will lose money. Essentially they are buying time in front of a machine capable of displaying millions of gambling combinations
at random and producing entertaining effects, with the small chance of a substantial win along the way.
The average time provided for a given investment, and therefore the entertainment value, varies with both the overall payout setting and the spread of smaller pay combinations on the respective machine.
The design of the tax system affects the entertainment value and extent of use of the entu-e system.
If taxation (including any levies) is a. fixed percentage of the Turnover of machines, the venues take the variable residual of Player Loss and may incur a loss themselves if there is a large payout in the period. This is particularly relevant to the relatively small Territory
venues.
Where tax is a percentage of Turnover it is natural that the venue will be disposed to acquiring machines with payout settings down towards the minimum allowable. Clearly, average play time for patrons is shortened (for the same expenditure) as the payout return declines. Some new games with better player odds are effectively disqualified altogether under this method of taxation, limiting future flexibility.
Queensland and South Australia have adopted Turnover based tax systems and their machines run very close to the minimum allowable return rate to patrons.
'Queensland would have the best Poker Machine system in Australia if it were not for the Turnover based tax system." 2
If taxation is legislated as a proportion of Player Loss, the play time is able to be extended by selecting higher payout machines. On the presumption that, over time, the patron will spend his or her personal limit, there will be at least the same end result for the venue and government. In fact there is the potential to increase overall Player Loss (across more players) as satisfaction with this entertainment form increases.
NSW, the ACT and Victoria all derive their tax as a proportion of Player Loss.
"Advances in technology ... have made taxation based on gross play an anachronism that belongs to the pre-electronic era. New systems ... allow immediate and secure computation of net cash held on a timely and reliable basis. Such a system assures both business and government that uncontrollable fluctuations in the relationship between gross play and net cash held will not adversely affect either party.'"'
The only real argument advanced to the Committee in support of the Turnover system was that it is absolutely certain and predictable in its application. Only the inwards coin counter on the machine has to be monitored.
2 Noel Gorman, President of the Registered and Licensed Clubs Association of Queensland 3 From Paper prepared by Tattersalls, May 1991.
Because the alternative Player Loss basis of taxation is sometimes referred to as a "profit"
based system, ie, profit by the Poker Machine operator, it is easy to conclude that some capital or operating deductions are involved in establishing that profit and that
uncertainties due to the application of discretion may be involved.
Actually all that is involved is subtraction of the coins out meter reading from the coins in meter reading - both are monitored by the central electronic system.
The Northern Territory Government has indicated that its predisposition is for a Turnover based system of taxation. For the reasons stated above, the Committee has concluded that changing to a Player Loss basis of taxation would better serve the objective of this community initiative.
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4.3 Community Benefit
Clubs are non-profit organisations whose income cannot by law be distributed to their members, corporations or any mdividual. All surplus revenue is reinvested in club facilities or donated to charities and community organisations.4
The degree to which Clubs and their surrounding communities will benefit from Poker Machines is dependent significantly on location and economies of scale, the extent of tax extracted, the machine ownership and allocation arrangements and the professionalism of management.
4.3.1 Location and Economies of Scale
As there is a limited and finite number of machines to be installed in clubs, their location is going to be vital if neighbourhood amenity and government revenue targets are to be met.
The productivity in terms of Player Loss per machine can easily vary from $1000 to $5000 per month, with outstanding examples outside this range.
Where there is only a small number of machines in a venue, the fixed operational overheads of the installation impact very heavily on the bottom line, leaving little, if any
Pamphlet "The New South Wales Registered Club Industry".
surplus after tax for the benefit of the club. Appendix A, relating to current Draw Card Machines, gives a good illustration of what happens in a relatively unregulated (in terms of machine numbers) environment. Clearly some clubs have introduced Draw Card Machines as a subsidised form of amusement for members. This sort of "all comers" distribution will completely undermine the economic potential of Poker Machines in the Territory.
On economy of scale grounds alone, a distribution of 540 machines to clubs on the basis of five each would produce quite a different result for the club industry (and for
government) from, say, ten sites with forty and fourteen with ten.
Some clubs are, by their nature and constitution, very restrictive of membership, preventing the flow of benefit from even well producing machines fairly into any broad base of social patronage.. "It's a blokey sort of club in a sport that has always been blokey - the call of the sea and all that. Of the club's ordinary members, only about 10%
are women."5
Location, and the ability of a club to understand and capitalise upon the local community profile in terms of potential membership, produces commercial advantage through factors of scale. "If clubs rely on their sporting membership they will go broke."6
Golf Clubs and Sailing Clubs are especially prone to low turnover Poker Machine operation, as their membership uses the premises as a base and spends relatively little time socialising indoors.
People who will regularly include Poker Machine playing as part of their leisure activity, and particularly those with the most leisure time (retirees and those whose families have grown up), are likely to demand a good choice of machines, because the fortunes of individual machines, or types of machines, are perceived to fluctuate. For this reason figures in the States show that, where the population base is sufficient, individual machine productivity keeps rising until the number of machines in venues reaches at least the 200
mark.
In Queensland applications for machines are approved by the Machine Gaming Commission. Even in a situation where overall machine numbers is not an issue, the Commission is very reluctant to approve ofinstallation& with fewer than five machines.
The view expressed on behalf of the Registered and Licensed Clubs Association of Queensland was that a venue with ten machines is marginal after staff costs. This was confirmed by the Licensed Clubs Association of the ACT, which organisation offered the view that a venue can not have a representative floor-plan with less than 60 Poker Machines.
5 Re Cruising Yacht Club of Australia - The Australian Magazine Dec 10-11,1994.
6 Noel Gorraan, President of the Registered and Licensed Clubs Association of Queensland.
4.3.2 Machine Taxation
The incidence of tax on Poker Machine gaming in the States and ACT varies considerably.
Compansonis difficult because of the different tax systems in operation, Profit or Turnover based.
The following Table compares the tax impost on the simple basis of $100 Player Loss^so i's'neutral to the way the tax is calculated.' Where necessary it is assumed that the machine is running at average Turnover for the location.
Poker Machines in Australia
Distribution of $100 Player Loss
.OCATION
NSW VICTORIA QUEENSLAND SOUTH AUST.
ACT
TASMANIA NT (proposed)
IN CLUBS
"STATE TAX
&
LEVIES
$20.92 33.33 32.25 32.31 22.50 27.00 54.17
jJACHINE COSTS
icluding Monitorin(
$9.96 33.33 10.62 16.38 9.30 54.89 11.96
VI
After Hardware Cost
$69.12 33.34 57.14 51.32 68.20 18.11 33.87
General assumptions: Machine cost $9000 and depreciated 25% pa; $20 per month venue maintenance per machine
Machine costs in the Victoria and Tasmania rows are high because in each case a third party "operator" will own aU machines placed in the venues and be entitledto'a share of revenue The machine cost in Tasmania also includei the maintenance fee payable to the
"operator" by each venue.
The Northern Territory 'proposed' row is based on the announced indicative tax level of 3.75% of Turnover, as well as the 2.75% levy on Turnover payable to the Casinos for the balance of their Licence term, on an 88% return to player.
In comparing taxes and levies, in both this table and the one m respect of hotels in Chapter 4.5, it is important to consider the total government impost when establishing what is a Statelike revenue position. Whether some of the government impost goes direct to a welfare purpose is not relevant in these considerations, as other States use their
Consolidated Fund, into which all their tax flows, to meet similar needs. In the Territory case, the fact that the government has agreed to compensate the casinos for the drop in patronage due to community poker machines, compensation which happens to be measured by the use of such machines, does not mean that the amount concerned should be additional to a Statelike level of Poker Machine taxation. A holistic approach recognises that the casinos will also be paying a greater proportion of their own revenues on in-house Poker Machines to government.
Separate identification of only the 'cost to government' side of the casino licences renegotiation as a levy on venues has beeu the subject of many negative submissions received by the Committee, particularly from clubs whose level of activity will have no impact on either casino.
Clearly the 'tax' in the Territory is out of proportion and the net retun to a Territory club will be insufficient for it to achieve the sort of community development anticipated by government unless it is very large.
At the rate proposed, a good average machine (yielding a Player Loss of $2400 per month) would deliver only $800 per month to the club, compared with over double this m Qld/NSW/ ACT (with the same sort of community development objective via clubs as the Territory).
Careful examination of these circumstances led the Committee to conclude that there was no room in the struchu-e of the industry in the Northern Territoiy for injection of an independent machine owning entity, such as Tattersalls or Tabcorp in the Victorian model, taking commercial returns.
In fact, if the objective set for this initiative is to be reached, then either the 'tax' has to be lowered or the machine costs absorbed by government rather than the club, or both.
Because venues in the Territory will be very small relative to the States, relief from the machine ownership cost, raising the club take to about $45 per $100, may look good against Victoria (without recognising the great economies of scale in its venues) but will produce insufficient venue effect in the Territory to be meaningful. Some downward adjustment of the tax rate itself will have to occur if the machines are to be anything more than tax gatherers.
At an 88% return to players there is a set mathematical relationship between Turnover and Player Loss. Tax reduction from the proposed 3.75% to 3% of Turnover sets tax at the equivalent of 25% of Player Loss, and tax at 2.4% of Turnover equals 20% of Player
Loss.
The following table shows the result of the government owning and not on-leasing the machines and of reducing its indicated tax rate. The $0.83 is allowance for $20 per month per machine for minor venue maintenance.
Distribution of $100 Player Loss
Tax Machine Cost Club
NT (31.25% tax as proposed) NT (Same but no lease charge) NT (25% tax rate & no lease) NT (20% tax rate & no lease)
$54.17
$54.17
$47.92
$42.92
$11.96
$0.83
$0.83
$0.83
$33.87.
$45.00
$51.25
$56.25
Even at 20% the club in the Northern Territory retains less than its counterpart in auy of the States with a deliberate club strengthening objective. This led the Committee to the following recommendation:
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4.3.3 Machine Ownership
The extreme variation between the State systems extends into the supplier authorisation, machine selection, machine acquisition, machine ownership and monitoring dimensions of the regulatory framework.
The following is a brief comparison of the systems:
Queensland
The applicant may stipulate the type of machine, but not in sufficient detail to lead to a single supplier. All purchasing is via bulk tenders called by an independent government Authority which borrows money as required through the government's central borrowing entity. The Authority admits suppliers to a list of approved tenderers and ownership of all machines remains with the Authority. Lease payments of $210 per month per machine (more for large sites) are made to the Authority. Machines are networked into a government site controller at each venue. This controller records and accumulates information on machine activity and events and is polled daily by a telephone link to the Queensland Treasury. Abnormalities are reported to the venue and made the subject of inspections as necessary.
There is no site charge for government monitoring.
New South Wales
Clubs buy their own machines, but only from licensed manufacturers.
There is no system of electronic monitoring of machines but a timetable for elimination of machines not capable, of being linked has been established.
The State operates a hardware testing laboratory and has developed interconnection standards and protocols, recognised by manufacturers, to come into force on 1 July 1995. The system relies on comprehensive returns, ahnost exclusively on computer disk, and verification by an mspectorate.
South Australia
Venues are able to deal directly with manufactarers in establishing their needs. Purchasing must be through the Government Purchasing Authority but the venue owns and is responsible for the machines. Monitoring is performed by a company formed by the Hotels and Clubs representative associations at a charge of $120 per machine per month.
Victoria
Venues contract with Tattersalls or Tabcorp, who own all machines, to position machines. Those companies are also responsible for monitoring their machines, which they must do continuously in real time, and promoting the industry. Machine cost to club venues, levied by the respective owning company, is a third of Player Loss.
Australian Capital Territory
Machines are owned by the venues, as in NSW, and monitoring is via rehims verified by an inspectorate.
Tasmania
Community machines will be introduced on 1 January 1997. They will be owned by Federal Hotels, holders of the Casino licences in Tasmania, who will pay a set percentage of Player Loss to the venues concerned. Federals will also perform the monitoring function.
The ownership of machines in venues is a controversial issue for venue operators.
In an industry where the popularity of games can change quickly, venue operators (especially large venue operators) generally want the flexibility to choose the machines which they think will perform best in their premises and to form relationships with suppliers so that they can have machine trade-ins and upgrades when they want them.
They see government ownership firstly as interference with commercial forces and secondly as leading to a build-up of outdated and under performing machines.
The Territory Government has announced that it is disposed to own the limited number of machines to be allocated and to lease them to venues. This policy arises out of prudential considerations.
In earlier decades there was evidence of corruption in deals between Poker Machine manufacturers and venue purchasers. In order to allay any suggestion that potential or actual repetition of these practices occurs, both Queensland and South Australia interpose a government purchasing agency between the venues and the manufacturers. Having acquired the machines and distributed them according to the generic orders received, Queensland retains ownership of them and the venues hold them under lease. South Australia, on the other hand, acts on specific venue orders and receives rfeimbursement of
cost.
Another reason why Queensland owns and then leases the machines is the relatively small and scattered nature of its venues, many having insufficient capital to pay for machines.
Borrowing is often not an available option for small clubs because of their financial status, their lack of transferable title in their site and the fragility of their licences.
Even if small venues could obtain finance they will lack the purchasing power to obtain prices and after sales service anything like that of the larger venues.
Claims were made before the Committee that, in Queensland, price was a dominant tender determinant and that it was hard to trade in or exchange poorly performing machines through the government to the manufacturer.
Central purchasing in South Australia gives the perception of breaking the supplier/venue secret commissions connection. In reality it simply achieves some cost saving via economies of scale and some logistic advantage for initial macbine certification as they move through m bulk.
Centralised government purchasing and ownership in Queensland provides the added advantage to the industry in that State of removing the 30% sales tax component of Poker Machine cost. This allows the government instmmentality to charge a monthly rental of
$210 per machine to most venues, an amount which is deemed sufficient to service the capital borrowed from the Treasury as well as covering the maintenance, monitoring and dqn-eciation of the machines.
The Committee has no objection in principle to venue ownership of Poker Machines;
however, it finds no alternative to government ownership in the particular circumstances of the Northern Territory at this time.
Recommendations (5) and (12) of this report propose that venues be shielded from any government lease payment as a necessary trade-off with the tax regime. With acceptance of Recommendation (8), machines may have to be transferred between venues on
productivity grounds. In combination, these arrangements will mean that the machines are provided to venues under a management contract rather than by lease. Under that contract the allocating authority would have to do its best to keep machines up to date (it would do this anyway under its productivity charter).
Retention of government ownership without leasing also remforces the Crown status of the machines for sales tax purposes, substantially reducing the chance of an unfavourable ruling creating this liability.
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4.3.4 Machine Allocation
Optimising the distribution of machines will be a vital aspect of Poker Machine regulation and probably the most difficult to settle in an objective way. To some extent there will be rationalisation over time, as stronger clubs win the competition for active membership and boost their facilities, and amalgamations occur.
The difficulty for the Territory in leaving optimisation (within the finite available machine number) to market forces is the inevitability that some machines will languish in small, quietly self-serving venues, effectively taking them out of the bigger equation.-
The two stage distribution of machines during the inb-oductory phase will leave some room for fine tuning distribution after initial licences are granted. Clubs achieving the best results will be entitled to more favourable consideration in the second round.
Not only should the initial distribution be as potentially productive as possible, it should be made with a continuing eye to results and be subject to withdrawal of some or all
machines where performance iu the installation is below expectation or falling. Clearly, such flexibility remains a practical proposition only in the circumstance where the government owns the machines.
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The allocation and reallocation process will be conducted in a climate of intense lobbying and pressure. It will be very important for the integrity of the whole system, and not just its productivity, that the formal decisions are made objectively.
This leads to consideration of the composition of the allocation authority.
Some State authorities have pointed out to the Committee that there is no such a thing as an impartial industry representative, and the Committee accepts that, at least until the review is conducted, oo club or hotel representatives should be on that authority. This is distinct from consideration of the desirability of having some industry representatives on the regulating authority itself.
At the same time the Committee recognises that, for practical reasons, the staff of the regulatoiy authority will necessarily be the executive arm of the allocation authority, whatever its status.
The Committee has concluded that there should be a separate and independent Board established to take all Poker Machine ownership decisions and that this Board be serviced
by the executive of the regulatory authority. The recommended membership of the Board should be re-examined in the 1998 review process.
The Committee recognises that the availability of Poker Machines is an article of government policy and therefore the- actions of this Board, as a subset of that policy, should be the subject of appeal to the responsible Minister and subject to report.
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4.3.5 Professional Club Management
Location and scale factors, as well as the tax system and so on, are important, but the productivity of machines is heavily dependent on club management skills, in particular the reality and perception of:
• integrity of management;
• financial direction and understandable reporting;
• contribution to community works and services in a manner sensitive to member opmion;
• design flair in creating club facilities and in creating the right ambience;
• ability to attract custom through new membership and to keep it active through promotions;
• customer orientation through motivated staff; and
• most importantly, combination of all this in a well founded and demonstratively achievable business plan.
Managerial competence and direction in clubs will be the most important factor in ensuring that machines are placed to best effect.
By their nature few clubs in the Territory have been in a position to attract highly
competent management staff, well trained employees with career expectations and a Board with commercial financial and legal talent.
Most clubs in the Territory are incorporated under the Associations Incorporation Act.
This legislation is designed to give some formal status to voluntary community interest groups." Whilst it is due for major revision in 1995 it falls far short of the Corporations Law in terms of Director accountability, audit and accounting standards, disclosure and so on. Many clubs are very small and a "big business" overlay would be superfluous and prohibitively costly.
No club which cannot comply with the business conduct and record keqring requirements of the Corporations Law should be able to enter the high volume end of the Poker Machine industry.
Since 1969, all clubs in NSW have been required to be incorporated, either under the relevant company legislation of the day or the Co-operation Act (for cooperative- operative clubs).
Smaller Territory clubs without the resources and cash flow to afford the higher level of incorporation may still qualify for allocation of machines, but only if they can satisfy selected accounting, responsibilities and reporting requirements of the Corporations Law.
Strict examination of the clubs' rules of association, committee member and public officer qualifications, and past regulatory compliance record should also be conducted. Those clubs foreseeing difficulties in these matters will have to act very promptly if they are to be considered seriously in the first round of distribution of machines.
The Inquiry believes that the threshold for Corporations Law incorporation should be 10 machines.
As with the States, it should be a condition that Poker Machine venues hold the appropriate licence under the Liquor Licensing Act. This serves a range of purposes, including rules as to minors and visitors.
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The Select Committee assumes that the new legislation will follow the precedents of the State legislation in relation to the paperwork to accompany each application.
The legislation will include such things as full details of club officers, area demographics and population served, existing membership details, financial information, hours kept, physical plans, ownership and lease details. It will enable the organisation's stability, competence and repute to be judged, and the security and suitability of the premises to be confirmed.
It is fair to potential applicants that as much time as possible be given between the announcement of selection criteria and the lodgement date. In turn the lodgement date should be set in anticipation of several months' work in analysis, verification, ranking and probity checks.
Even though Poker Machines will not be introduced into Tasmanian venues until 1 January 1997, the selection criteria will be available by 30 June 1995, advertising for applications by 31 December 1995 with a closing date of 31 March 1996 and notice of intention to issue licences after 30 June 1996.
In the Territory this process will need to contain similar features but within a much shorter time frame.
Because there is a limit on the number of machines to be allocated, submission of a business plan as an adjunct to valid applications will be the key to the objective assessment of applications. Early commencement of these planning processes will enable some marginal clubs to see whether it is worth entering the Poker Machine industry at all, or perhaps to consider joining forces with some other club by amalgamation.
For example, the opening hours of some clubs would have to be extended substantially for them to gain anything like a reasonable return from machines. This has severe
management implications. Very small clubs would not have the secure facilities or the resources necessary to improve them and may lack the skills necessary to operate an attractive venue and obtain good average returns from Poker Machines.
This plan should include membership development, marketing, premises development, staff training and community project funding targets. Detailed guidance on how to prepare such a plan should be available from the regulatory authority and TAFE involvement with teaching its elements should be encouraged.
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Clubs should be required to report annually to the Licensing Authority on the outcome of their plan andhs refinement, as part of the ongoing assessment of global optimisation.
4.4 Government Benefit
With the switch to a machine profit (Player Loss) based tax system, it can be expected &at t'h^average return to player will rise to about 90% on club machines. Atthe_sam^tuM^
th^ Tumo&v7rofthe machines will rise, so tbat the players will\o^, on ^CTage,^^same^
amou"ntofmoney7ln fact, experience in Victoria shows that there is a^litoodthaU P'layCT"Losswiunse~because patronage rises as a result of the perceived "fhendliness"
extended entertainment value of the machines.
The changed tax basis will, therefore, have a mildly positive influence on revenue
estimates.
Reduction in the tax rate from 3.75% of Turnover to 25% of Player Loss across^! vmu^s
^^duce'th7average"annual'tax per machine from $8200 to $7350. Tor the total of 680 machines this is a drop in gross tax of $0.8 million per annum to $5 million.
If venues pay no lease payment for machines placed therein, the cos«o goverament;based on'$7000 capital cost per machine, with a Ufe of five years and including_mamtenmc^
w'cml'dbe ab^\~'.6 miUion perannum. The net return to government would therefore 1 of the order of $3.4 million per annum.
These adjustments are part of the balance to be achieved in securing Ae community^
development objective: There is an equivalent rise in the proceeds retained by^ven^es.^
This is'spent locally on building works and employ
government in other directions-(See 5.5), including the application of new tax rates on casino machines.
4.5 Machines in Hotels
Operation of a limited number of Poker Machines in Hotels has beenannounce^as, Government policy. This is an extension of the existing policy allowing Draw <
Machines in Hotels.
The Draw Card Machines were allowed into hotels to help them maintain their position m thefac'eofthe growth in similar but untaxed gaming machines in clubs. ^
The:curren1: distribution of those Draw Card Machines is shown in Appendix A.
Tbese machines are taxed at 6% of Turnover, half of which goes to selected sports and^
coimnun^groups' Only eight hotels derive more than $500 per week gross profit from their bank of machines.
The government has also announced that it proposes to continue a 3% (on Turnover) conunumty benefit levy on Poker Machines in hotels. When combined with the proposed government tax rate and casino levy of 3.75% and 2.75% respectively, the return to hotels would be a maximum of 2.5% of Turnover (as the minimum return to player is proposed to be 88%).
Out of this 2.5% of Turnover the hotels will have to meet all machine hardware and operational costs. This is far less than their profit retention at present. There are two offsetting factors. One is the fact that cash paying Poker Machines will create far more gambling activity than their predecessors; the other is the effect of the lift in patronage to the venue. However, there is little chance of a surplus allowing improvements to facilities, particularly as the return on hotel machines is subject to Commonwealth Income Tax.
The following table compares the shares of Player Loss in hotel venues around the country in the same way as the clubs' position was compared in 4.3.2 above.
Poker Machines in Australia
Distribution of $100 Player Loss
LOCATION
NSW VICTORIA QUEENSLAND SOUTH AUST.
\CT
FASMANIA
^(proposed)
IN HOTELS
STATE TAX
&
LEVIES
$28.87
$41.67
$67.80
$32.31
$35.00
$29.00
$79.17
MACHINE COSTS Including Monitorin
$10.38
$33.33
$12.15
$16.38
$9.30
$54.89
$10.23
VENUE After Hardware Cost
^Subject to Income Tax
$60.76
$25.00
$20.05
$51.32
$55.70
$16.11
$10.61
General assumptions: Machine cosl $9000 and depreciated 25% pa; $20 pm venue maintenance per machine
Machine costs are high in Victoria and in Tasmania (1997) because of the interposition of commercial operators to own and make a commercial return on machines.
Comparison of this table with the one in 4.3 above shows that there is^a high£r,tax/levy mix on hotel machines relative to clubs in all jurisdictions except Soutti Ausa-aua.
In addition, the attractiveness of play on hotel machines in some States is deliberately^ ^ redTcedas"a"control measure to help overcome some of the temptation provoked by their ease of access. On the other hand, Victoria, with a very low return per macnme,^ ^
^^pen7a^sfor'this"by~aUowing up to 105 machines in any hotel. South Australia allows forty.
In NSW there is a maximum often machines allowed in any hotel, and the machines them"selves'are"hopperiess7requiring any credits to bewllected at a counter Th^only^
available on hotel machines is~draw poker. As distinct from club machines, they are toed onTumover rather than on player loss. This tends to drive down the return to player and reduces the entertainment span.
In the ACT there is also a limit often machines per hotel. They may display only draw poker or'keno games. The highest denomination of coin accepted is 20 cents.
In Queensland there is also a limit often machines per hotel at 10 cent denomination.
Tasmania will stage its hotel number limit from 15 up to 30 over ten years or so.
The table shows that Territory figures are way out of proportion. It is probable that hotels would make no surplus after operating costs if the Territory system were i
proposed.
The next table repeats the effects of relieving the hotels of machine ownership costs and^
lowe7tax7atesrars with the earlier sensitivity case for clubs. The centre column is machine cost'and the $0.76 is allowance for $20 per month per machine formnorvenue^
maintenance7The assumption made is tiiat the return to player will remain at 88%.
Distribution of $100 Player Loss
NT (proposed)
NT (Same but no lease charge) NT (25% tax rate & no lease)
NT (20% tax rate & no lease)
Tax
$79.17
$79.17
$72.92
$67.92
Machine Cost
$10.23
$0.76
$0.76
$0.76
Hotel
$10.61
$20.07
$26.32
$31.32
36
If the number of machines in hotel venues is to be restricted, following consideration of the recommendation in Chapter 7, and there is no separate compensation for the gaming machines made redundant by the introduction of Poker Machines, then the same tax and ownership arrangement as for club machines is warranted.
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The Select Committee learned, from its visit to well managed hotel venues with Poker Machines in the States, that the successful licensee is one who recognises that hotels are simply a part of the leisure industry.
(Poker Machine introduction)...Aai removed the necessity for unsavoury promotional gimmicks...in South Australia and Victoria.7
The important thing is to see that gaming and our old trading practices simply don't mix. To be successful in gaming you must provide that environment that is conducive for it to be successful. To do that you must invest. So simply to take machines and put them in the corner of the bar will not work*
The development of hotels with a mix of eating, drinking and recreational activities designed around the demographic profile of the locality, and perceived as being safe, can b-ansform a detraction into a social asset. With the introduction of the 0.05% alcohol limit for drivers, it is all the more important that this should be the norm rather than the exception.
Evidence by Mr F. Basheer , President South Australian Hotels association 8 Evidence by Mr D Sallis, Executive Officer, NTHHA
37
Chapter 5
PERSONAL, SOCIAL AND ECONOMIC CONSEQUENCES
5.1 Assessment Considerations
The extent and direction of the consequences and the impacts of Poker Machines are determined by the design feahffes of the regulatory system used, by demographic factors, by regional economic situations and even by historical influences.
In its visit to the States the Select Committee observed noticeably different patterns of benefit and disadvantage developing for individuals and communities in each State.
As stated earlier, the variations are, at least to some extent, the product of deliberate objective setting by governments. The contrasting extremes of this spectrum are in NSW and Victoria.
NSW chose a low tax regime to encourage clubs to grow into community leisure and interaction centres. Victoria chose a high tax model with widespread public access to machines and allowing individual and corporate profit via open competition.
The regulatory system proposed for the Territory will be closer to that of Queensland than of any other State. Because of limited machine numbers, the Territory will have to be more deliberate about the distribution of machines to clubs to make them productive, both in terms of their capacity to foster better community facilities and as a source of tax revenue. The allocation of full feature machines to hotels will be basically the same as in Queensland.
Consequently, the Territory has an immediate precedent. It is important to note, however, that differences in the Poker Machine environment in the Territory may well produce significant variation. All research findings in this Chapter must be read with this qualification.
Nevertheless, this available precedent is the more valuable for the fact that, of all the States, Queensland has done the most to understand and react to Poker Machine impacts.
Poker machines were introduced into community venues in Queensland early m 1992. A year later the government commissioned a social and economic impact shidy of the effects of this move and to review the operations of centres established for problem gamblers and their families. A review of the impact of Poker Machines on charitable fundraising was commissioned to run in parallel with this shidy. The latter report and the report of the first year of the former study9 have recently been released.
Referred to herein as the Queensland Social and Economic Impact Study: 1994
38 39
