ROA CALL FOR RE-THINK ON LEVY
BRITAIN’S racehorse owners have called for consideration to be given to the financing of their sport returning to a percentage of betting turnover rather than the current gross profits system.
That would mean going back to an arrangement that existed before 2001.
But Paul Dixon, President of the Racehorse Owners Association, in his major speech of the year, said that the country’s bookmakers had reneged on a promise not to take some of their operations offshore - away from the taxman and avoiding Levy payments - when the switch to gross profits was made.
“The current gross profits system for paying tax and Levy was advocated by the bookmakers at the turn of the century and agreed by the government on the basis that the bookmakers would not go offshore. But they have gone offshore,” he told the ROA’s annual general meeting in London.
With the current Levy returns plummeting, their contributions could decline to the point where prize-money was down by 25% next year, so he concluded: “In this time of crisis, racing must seriously consider whether a return to a system where the Levy is based on turnover would be in our best interests.”
Mr Dixon, using a Deloittes estimate from 2007 that £12 billion annually was bet on British racing, said 1.25% of that would mean income to racing from the Levy of £150 million, in contrast to less than £80 million now.
He told his audience of racing industry leaders and members of the association: “It is not that we have to live with the extraordinary and uncomfortable position that what is bad for punters is good for British racing and vice versa.
“It is not that when bookmakers lose £50m at Royal Ascot, we know that racing’s income is reduced by yet another £5m.
“It is not even the fact that the gross profits system makes forecasting racing’s income volatile and unpredictable.
“All these factors we could live with – indeed, we have lived with them since 2001 – but the betting world has changed in a way that we could never have predicted nearly a decade ago.
“The reason for this is the extraordinary growth of betting exchanges. Exchanges have changed the whole dynamics of betting in recent years and, in particular, they have had a major effect on margins. Indeed, a by-product of returning to a turnover system would deal with the problem that racing has with the exchanges not paying an adequate amount into the Levy in one fell swoop – they would simply be paying a lot more than they are now.”
Mr Dixon said Britain’s Horsemen – owners, trainers, breeders, jockeys and stable staff – faced enormous challenges.
The betting industry, he said, refused to acknowledge the continuing value of horse racing as their core betting product and was using “every wheeze known to man to diminish what they pay to racing” and racecourses closely guarded their “impressive and increasing picture rights income”.
The ROA President said that the betting industry “disgracefully manipulated” a threshold system designed to protect smaller independent bookmakers.
“The vast majority of betting shops must be made to return to making Levy payments on the full statutory 10% of gross profits and the government must find a way to ensure that bets on British horseracing made via overseas-based betting operators have to pay tax and Levy,” he said.
Mr Dixon also estimated that income to racecourses from picture rights would increase from more than £60 million last year to nearly £90 million in 2013 – “it may even overtake the Levy as the biggest source of funding coming into racing”.
“With the balance of racing’s income beginning to tilt towards a rights-based system, it is essential that the Horsemen’s Group finds a way that gives us more confidence that a reasonable proportion of picture rights income is contributed to prize-money,” he said.
“The ROA and the Horsemen’s Group must work with individual racecourses and racecourse groups to address this through negotiations that will lead to formal contracts on racecourses’ contributions to prize-money.
“We have no wish to fall out with racecourses – indeed we have to work with them - but it is clear that we, as the supplier of racing’s raw material, must know what we are going to get for our product before we supply it, as in any other walk of life. It is equally clear that this can no longer rely on a system of minimum prize-money values where the value is simply pegged, as now, to Levy Board contributions.
“The Horsemen’s Group represents one hell of a big constituent for any racecourse to ignore. We would make it abundantly clear to all our owners, trainers, breeders, jockeys and stable staff what our expectations are in terms of contributions to prize-money throughout the various grades of race for each racecourse. It is part of our remit to show which racecourses are playing the game and which of them are not.”
Mr Dixon also said he believed that the current number of 1,500 fixtures in a year was unsustainable in the current economic climate.
24/06/2010