Royal Commission Hears Crown Avoided $167M in Pokies Tax

Crown on the hook for $167 million worth of avoided pokies tax

Just as Crown Resorts thought things could not get any worse, the Royal Commission into its affairs heard the casino giant avoided $167 million in pokies tax. The pokies tax avoidance happened between 2012 and 2016.

Last year’s Bergin Inquiry prompted the New South Wales government to suspend Crown’s licence for its casino in Barangaroo, Sydney. It ultimately led to the resignation of several Crown senior executives and directors, too.

Victoria’s royal commission heard damning evidence regarding Crown avoiding paying a massive sum of pokies tax. Crown has deducted the cost of free accommodation, means, and loyalty scheme points from pokies earnings since at least 2014. That is a lot of savings because Crown has more than 2,600 pokie machines.

Mark Mackay, Crown’s executive general manager of gaming machines, gave evidence at the royal commission this week. Crown Melbourne CEO Xavier Walsh asked Mackay to calculate how much Crown saved due to these deductions. Mackay compiled a spreadsheet showing pokies tax underpayments of $167 million. Mackay conceded this figure could be as high as $200 million if the spreadsheet included the past two years figures.

Crown Knew It Was Avoiding Pokies Tax

Crown pays Victoria gambling tax based on gross gambling revenue. It arrives at this figure by taking the total money received through gambling and subtracting whatever it pays out as winnings. Counting other costs as an expense led to $167 million worth of pokies tax avoidance.

Walsh believed the deductions were legitimate but had concerns about the ambiguity in the tax legislation.

Geoffrey Kozminsky is one of the counsel assisting the inquiry. Kozminsky questioned Mackay on Monday.

“You agree with me that loyalty program benefits are not winnings?”

“The definition of winnings, I think, is where the ambiguity is. But they are not from a gaming machine event,” Mackay replied.

Commissioner Ray Finkelstein QC asked if Crown attempted to cover up its pokies tax underpayments. Mackay admitted this was the case. Finkelstein referred to Crown’s internal tax documents, which calls the cost of loyalty benefits as “jackpot” expenses.

“Does that mask what it really is?” Finkelstein asked.

“I don’t know; that’s what its always been called,” came Mackay’s reply.

The commission requested Crown Melbourne’s directors supply information about any possible breached of agreements with the state government. Crown still has not handed over any information at all. Furthermore, Crown said it could not think of an acceptable excuse for not doing so.

Calls To Extend Royal Commission

The Royal Commission ends on August 1, but there are calls to extend it. Steph Ryan, the opposition’s gambling spokesperson, is one person calling for an extension.

Ryan wants the commission extended beyond August 1 so “it can do its job properly.”

It is not only avoiding pokies tax that is a dark cloud hanging over Crown right now. The casino admitted it breached Victoria’s Casino Control Act between 2012 2016. It did this by taking $160 million in credit and debit card payments from international hotel guests for casino chips. State law bans this practice.

The Bergin inquiry only looked at specific account for traces of money laundering. The commission delved deeper and uncovered more than $5 million worth of suspicious transactions across 14 accounts. Some of the transactions were as recent as three months ago.

It is extremely difficult to see Crown allowed to operate any casino in the near future. The NSW Independent Liquor & Gaming Authority wants to reinstate Crown’s Sydney licence by October. However, the ILGA stated this before these latest revelations.

Crown faces the genuine prospect of losing its Victoria casino licence. Its Perth licence will be under threat if Crown loses the right to operate in NSW. This, in turn, casts severe doubts over Crown’s future. The story rumbles on.