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Australia has terminated a valuable research and development (R&D) tax concession for gambling and tobacco companies, likely culling the bottom line of the nation’s gambling industry by millions of dollars each year.
The Mid-Year Economic and Fiscal Outlook released this week by Treasurer Jim Chalmers said: “Research and development activities related to gambling can exacerbate addiction and associated harms, while activities related to tobacco can increase health risks.
“Excluding these activities will ensure that the Government is not subsidising this type of research and development.
“Activities that are solely for the purpose of harm reduction, such as reducing addiction, will remain eligible to receive support.”
The outlook projects that the Australian Taxation Office (ATO) will gain A$6m in revenue per year and save A$4m in tax returns over the same period for gambling and tobacco companies combined after the incentive expires on July 1 next year, amounting to a net A$10m annual gain for the government.
The cuts were flagged on October 28 when Chalmers told a press conference that he held a “personal view” about gambling companies claiming tens of millions of dollars in R&D credits.
“I have a personal view about that, which is that it’s problematic … I saw when some of that information was released not that long ago, that that’s the sort of issue that warrants our attention,” he said.
“And it will receive our attention.”
Chalmers was referring to ATO data released earlier in October on gambling company tax breaks, which the Guardian daily reported as amounting to A$86.5m for the 2021-2022 financial year.
In that financial year, retail wagering giant Tabcorp Holdings claimed almost half of that total (A$39.5m), with three other companies dominating the remainder: gaming machine manufacturers Aristocrat Leisure ($22m) and Ainsworth Game Technology (A$15m), and corporate bookmaker PointsBet Holdings ($10m), the Guardian reported.
Industry lobby group Responsible Wagering Australia (RWA) responded angrily on Wednesday (December 18), accusing the government of risking “Australian jobs, innovation and investment”.
“Our industry was not consulted by the government on this decision — this is not how governments should engage with industry and it’s not the way to achieve effective policy outcomes,” RWA chief executive Kai Cantwell said.
“The Government’s announcement sets a dangerous precedent for how tax policy could be misused in the future — today it’s gambling companies being targeted, but any industry could be next if it’s used as a bargaining chip or horse-traded in future political deals.
“This slippery slope opens the door for tax policy to become a tool of moral judgement rather than a driver of economic growth.”
Cantwell called on the government to “reconsider this exclusion and engage in meaningful consultation with industry stakeholders to ensure tax policy supports innovation, economic growth, and jobs”.
The Sydney-based Gaming Technologies Association (GTA) also attacked the termination of the incentive after failing to sway the treasurer following his October comments.
CEO Jinesh Patel added in a statement that harm minimisation technologies trialled in pubs and clubs in recent months were among the products supported by the tax break.
“It is our expectation that the GTA and industry [will] be consulted by the treasurer to ensure all harm minimisation initiatives are supported,” Patel said.
The treasurer’s approach to the industry contrasts starkly with those of his Cabinet colleagues responsible for policy on gambling advertising, a perennially contested issue that has come close to being resolved with a full ban on all ads for online products.
Chalmers’ personal views on the matter also align with a major public backlash against the gambling industry after years of scandal, criminal allegations and/or board purges across gaming segments.
However, two ministers responsible for answering a unanimous lower house committee’s support for an ad ban have delayed their response for well over a year amid industry lobbying that likely helped kill the recommendation.
