Crown Resorts seeks clarification on proposed Victorian EGM tax hike

Blackstone’s recent offer for Crown Resorts has been rejected by the company’s board, citing it “does not represent compelling value”.

The Victorian government is proposing to raise the tax rate for electronic gaming machines at Crown Resorts’ Melbourne property from July 1, 2023, in a bid to ensure that the “casino operator is held to the highest standards of probity and integrity”.

Daniel Andrews, Premier of Victoria, confirmed the potential move as part of the state’s 2022/23 budget, which it is said will deliver $55.6m to implement the Crown royal commission recommendations.

Currently, EGMs operated by Crown casino are taxed at different rates to club venue operators. With the move expected to generate up to $30m per year in additional revenue.

Crown Melbourne’s EGMs are taxed at a flat rate of 31.57 per cent of machine revenue, plus a community benefit levy of one per cent of total machine revenue. 

Those operated by club venues are taxed on a sliding scale with progressive tax brackets. From August 2022, the maximum rate will stand at 60.67 per cent.

Responding to the move, the company noted: “Based on those discussions, Crown estimates that if the proposed arrangements were in place during FY2019 (being the last financial year prior to COVID-19), the impact on the earnings of Crown Melbourne would have been approximately $35m-$40m. 

“The actual impact of the proposed arrangements on future earnings will depend on various matters including the final details of the proposed arrangements and the revenue generated from electronic gaming machines at Crown Melbourne. 

“Noting the government is committed to the implementation of this measure, the government and Crown intend to establish a working group to further consider the implications for Crown and the process for implementing the changes proposed by the government, which will require legislation.”

This move is designed to support the work of a special manager, appointed following the Victoria royal commission and which has been given powers to oversee all aspects of the casino’s operations and report on whether they are satisfied that the firm is suitable to continue holding an operating licence.

It also includes funding to strengthen oversight of the casino with the establishment of the dedicated Victorian Gambling and Casino Control Commission, which will hold the casino operator to account with specialised staff and dedicated casino commissioners. 

Melissa Horne, Minister for Consumer Affairs, Gaming and Liquor Regulation, commented: “We’re getting on with delivering the reforms and investments needed to strengthen oversight of Crown and the whole Victorian gambling industry, with a focus on harm minimisation.” 

The first tranche of the Labour government’s response to the royal commission included the removal of arrangements with Crown – introduced by the previous coalition government – that prevented the state from changing regulations without having to pay compensation. 

Legislation passed in 2021 means the VGCCC already has increased powers to hold Crown to account. The government states that it will implement further reforms this year in line with the recommendations of the Royal Commission. 

Tim Pallas, Victorian Treasurer, added: “This is a fair and reasonable change that means Crown is paying the same tax rate on its pokies as smaller, community-based venues throughout Victoria. For too long, Crown has benefited from preferential tax treatment.”