Speech to New Zealand Racing Board AGMRacing
Good morning everyone. It is always a pleasure to attend the New Zealand Racing Board’s AGM and to be with the people who have committed so much to this great industry.
I would like to acknowledge your Chair, Glenda Hughes, and your Chief Executive Officer, John Allen. Thank you for inviting me to speak. John, I’m sure you have found your first eight months at the helm of the New Zealand Racing Board exciting and challenging.
I would also like to acknowledge the chairs and chief executives of the three racing bodies:
- Alan Jackson and Greg Purcell from New Zealand Thoroughbred Racing;
- Gary Allen and Edward Rennell from Harness Racing New Zealand;
- Craig Rendle and Jim Leach from the New Zealand Greyhound Racing Association;
I would like to acknowledge the recent appointments of Alan and Craig. Congratulations and best wishes – I look forward to working with you.
I’d also like to acknowledge my parliamentary colleague Kris Faafoi.
Minister’s role and expectations
You will be well aware that under the Racing Act, my direct role is with the New Zealand Racing Board, including appointing your chair and board members, in accordance with the Act’s purpose of providing effective governance for racing and promoting the long-term viability of New Zealand racing.
We all understand that the industry continues to face a number of challenges in ensuring the ongoing sustainability of the sector. These include shifting consumer preferences, as evidenced by their preference for lower-yield wagering products and lower attendances at race meetings. It’s important that we all understand the issues and work together to address these challenges.
As such, I conveyed my expectations of the Racing Board at last year’s AGM.
These included maximising returns to the industry by being vigilant with internal costs; addressing the challenges of offshore betting; and ensuring the welfare of animals in the industry.
Glenda Hughes now has two years’ experience under her belt, and with a new Chief Executive bringing fresh leadership, knowledge and expertise, the Racing Board is in a good position to tackle today’s challenging environment.
You’ll also be aware that all Board positions that were up for appointment had their incumbents reappointed. My view is that this shows a great deal of unity and constructive collaboration on the Board, and these reappointments will provide good consistency.
Racing Safety Development Fund
Yesterday I announced that over $618,000 will be invested in 26 projects to improve safety and development at racecourses.
This funding comes from the Racing Safety Development Fund which provides $1 million annually to racecourse safety and development across two funding rounds.
This year’s first funding round has supported a wide range of infrastructure projects including track irrigation, new starting gates, toilet facilities, and greyhound track rollers.
The fund plays an important role in supporting the safety of the racing industry for animals, staff and the wider public. In many areas these facilities are widely used by the community, and not just on race days.
The second funding round of the 2015/16 racing year opens for applications on 2 February 2016 and closes on 31 March 2016.
I encourage New Zealand’s racing clubs, and the respective code bodies, to apply to the Fund where there is the potential for important safety improvements
Work of the New Zealand Racing Board
The Racing Board has endeavoured to reduce its internal costs. I commend the Board’s cost management initiatives, and its efforts to use its resources more efficiently. At the same time, the Board must continue to invest in improving customer experience in an increasingly digital environment. It’s a delicate balance.
The competitiveness of the industry must be addressed and it’s clear that the Board is doing just that. The TAB’s Mobile App is a great example of the Board innovating and exploring different ways to ensure the long term sustainability of the sector.
A new, younger generation of potential racing customers who are used to having everything in the palm of their hand, as well as the wider percentage of New Zealanders who own a smartphone, increasingly want to interact with businesses in a digital environment, be it on an app or social media.
The Board is moving to meet the demand to make the industry adaptable and focused on consumer preferences and choice and the proliferation of internet-connected devices.
Online betting is the fastest-growing channel and is also the most competitive. Most industries across the globe have faced the influence of the internet.
Racing and traditional TAB operators have not been immune to these growing changes. Providing customers with more choice, such as a mobile TAB app, helps to ensure that New Zealand racing and sports can flourish.
Offshore Racing and Sports Betting Working Group
With that in mind, I’d like to turn to an issue that I know you are all very interested in, online betting on offshore websites.
Our laws do not prevent New Zealanders from betting with overseas bookmakers, but this activity takes place outside our domestic regulatory framework; a framework that requires the New Zealand TAB operator to return its profits to sustain New Zealand racing.
Before the 2014 election I listened to industry and made a commitment to seek a workable solution to the issue of New Zealanders betting via offshore websites, and offshore betting websites utilising New Zealand racing and sporting events without contributing to the costs of producing those events.
Offshore betting has been a long-standing problem for the racing industry. Because the New Zealand racing industry relies on wagering to fund its activities, it is completely understandable that there are concerns about the flow of money to offshore websites.
You have rightly pointed out that the practice is undermining investment and employment in New Zealand’s racing industry. Many offshore providers make no contribution to the local racing industry, to the New Zealand economy, or to the problem gambling levy.
Given the global trend towards online betting, this issue will continue to grow. That is why I began the process of addressing it by establishing the Offshore Betting Working Group to look at the size and causes of offshore betting, and to develop recommendations.
Releasing the report
Today, I am releasing the Working Group’s report. This report is an important first step towards tackling the problem of offshore racing and sports betting.
I want to begin by thanking the Working Group members for the time and hard work put in to getting this report completed. I would like to thank the Chair, Chris Tremain; John Allen and Greg McCarthy of the Racing Board; and Sir Paul Collins of Sport NZ. They were joined by two senior officials from the Department of Internal Affairs.
The Working Group worked well together. It gathered evidence; consulted widely; and considered the options. It was a great example of the industry and government working collaboratively.
The Working Group looked at a range of data sources to estimate the amount lost offshore. It has estimated that about $58 million per year of gross betting profit is lost offshore, resulting in no payments to the New Zealand racing or sporting sectors, or to the New Zealand government.
In addition, many offshore betting operators use New Zealand racing and sporting events without contributing to the costs. The Working Group estimated that $300 million is freely turned over by Australian corporate bookmakers on New Zealand racing.
The Working Group has also determined a range of factors that cause New Zealanders to bet with offshore gambling operators. By going offshore, the New Zealand consumer is able to access a broader range of products, and a greater service mix and pricing of products than from the New Zealand TAB.
For example, a comparison of betting options for Game 1 of the State of Origin competition in May 2015 revealed that there were 45 betting options available on the New Zealand TAB, compared with 203 with Centrebet.
The Working Group has made a number of recommendations to ensure the New Zealand TAB can better compete with offshore gambling operators, and to ensure the integrity of the New Zealand racing industry and the safety of its customers.
There seems to be a misconception among some that solving leakage is as simple as blocking access to overseas betting websites. For a couple of reasons, blocking access to websites simply won’t solve the issue.
The first reason is that anyone who can use google can find a way to get around this kind of measure fairly easily. The second point is that blocking access doesn’t take into account the full range of reasons why some New Zealanders choose to place their bets overseas – the reality is more complex than this.
I know you are working hard to improve your products and services to ensure your customers have an enjoyable and safe experience. The Working Group recommends that racing is supported by increasing the competitiveness of the New Zealand TAB through improving the products and services available. It also recommends amending the Racing Act 2003 to permit a broader and more competitive range of betting products.
The Working Group has recommended introducing an Offshore Bookmaker Fee through legislation. This would require an extraterritorial focus and a credible enforcement regime. Offshore gambling operators would have to pay a fee whenever they accept bets on racing and sporting events taking place in New Zealand. The fee would also apply when they accept bets from New Zealanders.
The Working Group estimates that introducing fees could initially be expected to raise up to $16 million a year in revenue. Fees revenue would support New Zealand’s racing and sports sectors, and contribute to the costs incurred in New Zealand to support problem gamblers and maintain the integrity of our racing and sports codes.
Successfully implementing the recommendations of the Working Group will not be easy.
The most significant recommendation – implementing the Offshore Bookmaker Fee – will be challenging, but it is my priority.
The reality is we are trying to create a legislative tool with an extra-territorial reach, which is by no means simple.
My desire is to ensure that what we ultimately enact is enforceable and effective. The last thing we all want is a quickly drawn-up strawman provision that achieves no real gains for the industry.
I’ve already had a meeting with the Racing Board and my Internal Affairs officials who have both committed to sharing information and giving this work priority.
Of course, we’re not alone in dealing with this challenge. I was at the recent Australasian Racing Ministers’ Conference where the issue was discussed.
The Australian States have dealt with the issue internally by way of racefields legislation. However, the country as a whole still faces the issue of international offshore bookmakers.
The Federal Government recently announced a similar group to look at the issue, and my officials are keeping a watching brief to share lessons. The report back date for the Australian group is intended to be late December.
Given that one of the main focuses on leakage involves the Australian market, it is important that our policy is consistent with theirs.
We also have our memorandum of understanding with Tabcorp that is already returning money back to the NZRB.
The remaining working group recommendations relate to in-race betting, betting on a wider range of sport and prediction events will be dealt with separately.
I expect I will report on these to Cabinet in early 2016 together with issues Minister Dunne is considering as part of a broader gambling review.
Inland Revenue Tax Clarification Issues
As I’m sure many of you are aware, Inland Revenue has been engaging with the Thoroughbred Breeders Association on a large number of income tax and GST technical issues that affect the industry.
I understand Inland Revenue has recently written to the Association giving guidance on its view of the current law as it applies.
The guidance covers:
- when a breeder can be said to be either in business for income tax purposes, or have a taxable activity for GST purposes; and
- when such a business or taxable activity can be said to have commenced.
Hopefully this guidance will lead to a better understanding of how the current tax rules apply to the industry.
I acknowledge how important this clarification is for the industry so you can gain more certainty around securing investment.
I also accept that the industry wants to move forward on some of these issues and that the process to reach this clarification has taken too long.
Along with my colleague Minister Todd McClay, I’ve done my best to get to this stage as quick as possible.
I was in Hong Kong recently and took the opportunity to meet with the Hong Kong Jockey Club. This meeting provided a good opportunity to share and compare information on developments in Hong Kong, New Zealand and global racing.
The relationship with the HKJC is an important one for New Zealand with the HKJC buying approximately 150 New Zealand horses (amounting to some $29 million) each year.
The HKJC also sends many racehorses to New Zealand for rehabilitation and retirement at the end of their racing careers and New Zealand’s racing industry and agricultural universities provide wider services to HKJC interests in Hong Kong and greater China.
It was clear from this meeting that our industry has an excellent reputation to promote globally. The HKJC spoke of the success of their apprentice training programme where apprentices spent 6-10 months outside of Hong Kong to diversify their experience, build character and improve horsemanship. They are very pleased with how this is operating in New Zealand.
I am open to working closely with the Board and with the industry on ways we can continue to leverage our reputation globally.
Speaking of reputation, one of the major talking points of the recent Australasian Racing Ministers meeting in Brisbane was the issue of live-baiting in the Australian greyhound industry.
This practice – originally exposed through Four Corners current affairs programme – sent shockwaves through the local industry and resulted in many resignations and police investigations.
Although through the assurances I sought from the Board I am confident we don’t have any practices like these in our own industry, this issue highlights how critical it is that we remain absolutely vigilant on animal welfare if we want to maintain the social licence to operate our industry.
In conclusion, I will continue to work to do my part to ensure the industry is sustainable in the long term.
But it’s important to remember that the Racing Act was not established so that a politician held the destiny of the racing industry in his or her hands. The Racing Act was an industry-led initiative for the industry’s benefit. The destiny of the racing industry is in your hands.
I’m hopeful that what changes I will be able to make will be of benefit to the industry, but they won’t be a silver-bullet. There are plenty of challenges that the industry itself has the power to tackle. Some of these issues have been identified by the Working Group. I would encourage you all to read the final report.
Racing is one of New Zealand’s oldest and greatest pursuits. Ensuring that it remains both relevant and profitable is a challenge but it is certainly achievable.
Furthermore, I have much confidence in the Board and in the Chief Executive John Allen.
Thank you for inviting me here today. I wish you well for the next 12 months.