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the bulletinInternet
Threatens to Siphon
Off HK's Betting Dollars
In the information age, the betting dollar is under threat from a powerful new
technology with global reach, one that will have implications for everyone in the
horseracing industry ?V the
Internet.
"Racing depends on the collection and distribution of information ?V horse forms, betting odds, race results ?V and betting is a form of financial
transaction based on this information. This makes racing vulnerable to the effects of the
Internet," said Mr Lawrence Wong, CEO of the Hong Kong Jockey Club, speaking at a
joint-Chamber luncheon on Oct. 20.
1998 saw an explosion of Internet gambling, from almost zero sites two years ago to
about 400 now. Turnover this year alone is expected to reach US$7 billion.
"What ??s alarming is
that many of these operators are based in offshore tax havens as far apart as Gibraltar,
the Caribbean, Bermuda and the Pacific Islands. Armed with the Internet they can penetrate
just about any market -- the U.S., the U.K., Japan, Australia and Hong Kong," he
said.
Mr Wong said that because they can offer tax-free betting, they pose a serious threat.
All countries around the world tax betting ?V although the rate varies considerably. In Australia the average is 5
per cent. In the U.K. it is 6.75 per cent. In Hong Kong, the second highest in the world,
the weighted average is 14 per cent. Being located offshore, these operators are able to
evade tax and so offer tax-free betting, he said.
Mr Wong said that these operators are just starting out but it ??s clear they plan to siphon betting dollars away from racing
countries.
"Racing will lose the betting income that is its lifeblood. Governments, unable to
tax the invisible flows of dollars, will see revenues plunge. The U.K. Treasury is already
alarmed by developments in Gibraltar. The U.S. Congress has recommended banning Internet
gambling altogether," he said.
Given Hong Kong ??s large
betting turnover, Mr Wong said that the SAR is a tempting target for Internet gambling
operators.
Also its information technology is highly advanced and Hong Kong people are Internet
literate. In addition, Hong Kong has a very high rate of betting duty. But the draw card
could be the 14 per cent tax that Hong Kong punters must pay.
"It is the second highest in the world so it is easy for operators to exploit the
differential," he said.
He points out that the threat is already here in the form of one offshore operator
which recently opened a large office in Hong Kong to solicit business.
Mr Wong said that governments have tried to respond by making Internet gambling
illegal, but the solution should be to rationalise betting taxes worldwide.
"We need a uniform, global tax rate, low enough to give us a fighting chance
against these offshore pirates," he said.
The International Conference of Horseracing Authorities is forming a taskforce to
develop a long-term strategy to safeguard the racing industry. But for it to succeed, an
alliance of government and racing industries worldwide will need to be formed.
"We can ??t allow betting
dollars to be siphoned off to some obscure offshore island. The Hong Kong betting dollar
is our community asset ?V not
fair game to all. We must find a way to protect it," he said. |
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