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Pokies Community Fund rigged in ACT Clubs’ Favour

The harm from gambling is almost on par with dependent alcohol use and major mental illness.

A new study released today investigates the likely burden of harm attributable to poker machine gambling, and its distribution in the Australian Capital Territory.

The study, Community benefits claimed by licenced clubs operating poker machines in the ACT, conducted by the School of Public Health and Preventive Medicine, Monash University, also examined the nature and value of contributions made to community organisations, charities and sporting organisations by all clubs and hotels operating in the ACT.

Poker machines deliver ACT Clubs and Hotels $167.2 million annually. Under the Gaming Machine Act 2004, ACT Licensed Clubs must allocate eight per cent of their net gaming machine revenue to support local communities.

Our research set out to determine what percentage of that revenue finds its way back to genuine community concerns.

We wanted to answer the question; ‘do community’ contributions from poker machine (electronic gaming machine or EGM) venues offset the harm caused by poker machine gambling in the ACT?’

Firstly, it’s important to recognize the extent of the problem.

Our study revealed that gambling harm is widespread through the community and directly affects up to 16,000 people, about 4,400 of these directly at a serious to very serious level. In addition, between 80,000 and 160,000 people are affected by gambling harm to some degree, with between 22,000 and 44,000 of these affected to a significant degree.

In fact, the level of harm associated with gambling in the ACT is close to that associated with harmful or dependent alcohol use, and on a level similar to major mental illness, and well in excess of that associated with cannabis dependency.

It is that level of harm, that the Community contributions from poker machines are designed to off-set.

Poker machines are clearly the most harmful form of gambling in Australia (and increasingly, internationally). EGMs operated in the ACT are high impact – they permit $10 maximum bets at high frequency and can therefore, a gambler can easily lose an average of $1,200 per hour.

So what did we find when we looked more closely at where that money is being directed?

It turns out sport and recreation is picking up the lion’s share of the funding.

Claimed contributions to sport and recreation account for 69.6 per cent of the total claimed for community contributions. Non-profit activities account for 16.6 per cent and charitable and social welfare categories account for 9.9 per cent of the total claimed.

Disappointingly, it is also clear that the contributions made to other community categories are very modest. In the case of women’s sport and problem gambling, it is a miniscule proportion of that claimed for sport and recreation (3.1 per cent and 0.6 per cent, respectively).

Overall, the amount claimed for community contributions was 6.4 per cent of EGM losses in the ACT in 2014-15. The amount going to women’s sport was 0.12 per cent of EGM losses and that going to problem gambling 0.04 per cent of that total.

If contributions to elite and professional sport are deducted, the community contributions for all categories would amount to about $7.7 million, or 4.6 per cent of EGM revenue in 2014-15.

Further, if in-kind contributions are excluded, actual monetary contributions would be reduced to $4.7 million, equivalent to 2.8 per cent of EGM losses in the ACT in 2014-15.

ACT clubs have an almost complete monopoly to operate EGMs in the ACT. Gambling taxes and community contribution requirements implicitly acknowledge both this monopoly and the harmful social consequences of gambling. Community contributions are not a generous gift from a benevolent group of local organisations. They are an acknowledgement that gambling imposes significant social, psychological, physical, and emotional costs on Canberra community.

The lack of clarity and transparency in this system is also a concern. Current arrangements permit clubs in the ACT to provide an annual report, which is not available for public scrutiny. Instead, the Commission produces a sanitised report, which fails to disclose those who benefit or the actual purposes to which such benefits apply.

The community contributions scheme has, via the explicit agreement of the ACT Government in the Memorandum of Understanding agreed to between the government and ClubsACT in September 2012, also allowed clubs to argue that their tax rates should be kept at low levels compared to other Australian jurisdictions. The effective average rate of tax on EGM revenue in the ACT was 19.9 per cent in 2014-15. The Australian average for all jurisdictions was 29.9 per cent in 2014-15.

Schemes such as that currently enjoyed by the ACT EGM industry are opaque, misleading, and amenable to corruption and poor policy. They amount to a form of ‘tax farming’, and one in which the ‘tax farmer’ (the club) can pick and choose who gets what benefits without consideration of community, government, or other broad scale priorities.

It is impossible to avoid the conclusion that this scheme is not a substitute for well-considered government spending, nor is it an appropriate vehicle for funding community needs or requirements.

Our research in this respect leads us to conclude the system of community contributions by ACT clubs is flawed in several important ways.

It is opaque, and does not permit reasonable scrutiny of the purposes to which contributions are put.

It relies on self-reporting and because of its opacity is difficult for the public or the press, no matter how well informed, to understand how much is genuinely contributing to community purposes, and how much is either misleading, inappropriate or self-directed.

And as a result, it therefore appears to be susceptible to some forms of corruption, to allow the EGM industry to position itself as justified in its continued monopoly of a particular, high earning gambling product, and to minimise its taxation obligations.

The scheme should be scrapped and replaced with a government-mandated fund, overseen by an independent board completely divorced from the gambling industry.

View the research report.

Charles Livingstone

Charles Livingstone has been a Senior Lecturer with Monash University since 2006, initially with the Dept of Health Social Science and subsequently with the Department of Epidemiology and Preventive Medicine when the departments were merged. Prior to this, he was a Senior Research Fellow with the Australian Institute for Primary Care at La Trobe University. He is currently Honours coordinator for the Honours degree of the Bachelor of Health Science and coordinates a number of undergraduate units in the Bachelor of Health Science. His disciplinary background is in economics and social theory, in both of which he holds research degrees.

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