As part of their ruling the High Court would have had a thorough examination of Betfair's books to establish where & how they generate profits, & the ruling would seem to suggest that the imposition of a turnover tax would/should not render their business unprofitable & that with some tweaking, they could continue on as before.

That said I wonder if their review also looked at the issue of the impact on Betfair clients, profitable or not? I would assume one couldn't be done without the other, as clients leaving in droves tends to be bad for business;)

Perhaps we might be jumping the gun on this one.

Hardly likely norisk, courts concern themselves with the rights of the plaintiff not what effect it will have on the defendant.

as above, extremely unlikely, why should they?
It's the business of BF to make it work under the rules.

Maybe so, but it will end in tears for some punters on a low POT.
As a backer I'm not fond of bots making it difficult to bet against them by constantly changing the odds they would accept, but if there are no layers there will also be no chance for backers.

Time will tell but one thing is certain, as with new taxes there is only the end user who is going to pick up the bill.
The question is as CP has posited, can you afford to pay that bill?

Picked this up on another site.

How many shop owners hang the closed sign up when they have people at the counter with money in hand waiting to buy their product? Not many, right?

If they do then they are either idiots and will likely go broke, or they have an agenda.

I have been asking myself why Racing NSW consciously imposed a tax law on the giant global betting exchange Betfair, when they knew that their business model would never survive such a hit.

Many observers may consider Betfair (BF) are just another bookie and who cares anyway, but they are not a bookie as they facilitate bets between two punters when one bets to win and the other lays to lose. BF survive by collecting a 5% (or less) commission from whichever punter wins his investment. Racing NSW should be collecting their fair whack from the profit that Betfair makes from their winning members, but in a staggering affront, they have demanded a 1.5% tax based on the turnover.

I asked trader Tony Hargraves for a print out from his trades today and you can quickly see that Betfair have no future in the exchange business as a partner with RNSW.

Tony worked on ten races and as usual won on all of them, but importantly he turned over $16,754 and made a profit of $320 which yielded BF $6.40 Gross Profit on Tony's trades, but because RNSW want 1.5% of the turnover, BF lose $251 from the business.

OK got it!

Betfair generate incremental income for the racing industry as their unique fun model has attracted many players to the fold, and thousands of "retired" punters have flocked back to the industry as they love Betfair. The BF business creates millions of dollars of exotic bets and bet backs for corporate bookies including the TAB.

Tony had $8,200 in bet backs that stemmed from his trades today, which RNSW also grab 1.5%.

So we have proved that Betfair cannot survive under the RNSW tax and that they attract incremental revenue and participants to the industry. So given that very clear and obvious statement is some government watch dog going to ask why?

Racing Minister George Souris must ask RNSW why have they actively killed off a cash cow? We all would like to know the answer.


CHEERS.

Hi Garyf,

My first instinct is because the TAB effectively runs racing NSW and this model suits them just fine, they'll probably increase takeout to 20% and the mug punters won't notice a thing.

TheSchmile

Hi T.S.

When it comes to Peter v Landys and Racing N.S.W.
Anythings possible.

Cheers.
Garyf.

Nothing against the guy for finding what works but this is the reason betfair have failed, traders work the market and pay little, that's why they introduced the PC.

Glad it's not me who bets like this for a living.
But feel sorry for those who rely on this method.

Got to remember why and who is responsible,
For all of this it's one mans personal crusade to,
Effectively quell all competition.

It's not the first time Racing N.S.W. have been,
Emroiled in court cases just this is the first one,
They have effectively won.

Betfair didn't do this to themselves and didn't,
Change the terms of betting it was forced on to them.

Nobody elase seems to have mentioned this.

cheers.

Hi Garyf,

I still remember Vlandys on the racenet punters show and how good his rebuttals were.

Great mullet too....or am I imagining things?? :D

TheSchmile

L.OL.


Cheers.

Australian racing administrators either just don't understand the exchange concept or they want them out completely.

The TAB and bookies make money on turnover, exchanges make money on commission from winning bets.
Either way, I can adapt by utilising foreign markets more, but I think it's sad that in the end Australian racing will actually suffer rather than gain from a turnover tax.

If it weren't for an exchange, I certainly wouldn't be looking at GB, SAF, UAE, USA markets etc.
I'm quite sure that people from those countries wouldn't be looking at AUS racing either, except for maybe a handful of races each year.
So in the end, AUS racing will be the loser.

In response to the decision of Racing Victoria to move from a funding model based on gross revenue to one based on turnover, Betfair Australasia’s CEO Giles Thompson stated: “We are extremely disappointed that Racing Victoria has ignored the economic analysis and evidence which clearly demonstrates that a fee based on gross revenue is in the best long term interests of Victorian racing.

“Racing Victoria engaged Peter Yates and PWC to conduct a widespread review to find the optimum funding model for racing and it was found that a fee based on gross revenue ensured the greater returns to racing in the long term whilst continuing to foster competition. This was the same conclusion reached by the Productivity Commission.

“Betfair has always paid race fields fees to the Victorian racing industry. A fee based on gross revenue ensured all types of wagering operators could compete and offer their services to punters to bet on Victorian racing.

“A gross revenue model has been in place in Victoria for over 3 years and in that time the racing industry has continued to flourish with competition driving sponsorships and increased services to punters. Betfair has been at the forefront of that competition. With over 4 million customers worldwide, Betfair provides the Victorian racing industry with the opportunity to tap into a global market place that local operators can’t provide.

“A fee of 1.5% of turnover equates to 60% of Betfair’s revenue generated on Victorian racing and this will increase to 80% of revenue during October and November. No business can sustain costs at that level and clearly we will need to consider our response.

“By offering punters the experience of a betting exchange, we are providing a unique platform for them to engage with Victorian racing. A betting exchange relies on liquidity and is therefore a high turnover operator by definition. The fee being proposed by Racing Victoria seriously hampers the ability to offer such a product on commercially viable terms.

“The racing industry is dependent on funding it receives from punters and racing bodies should be doing everything in their power to ensure they are provided with choice, customer service and competitive prices. A fee based on turnover seriously limits competition and will only hurt racing in the long term”.

I concur.

lomaca, this was an appeal by Betfair and Sportsbet & as part of the appeal they would have needed to demonstrate how the introduction of a turnover tax would negatively impact their businesses.

"Betfair argued that the payment of a fee calculated on the basis of turnover was unconstitutional because it imposed a greater burden on its profit than it did on the New South Wales totalisator operator, TAB Ltd (TAB). This was viewed by the Full Court as being the case because its business model is based, in part, on smaller margins and requires higher turnover to achieve equivalent revenues when compared with other models (i.e. bookmakers or totalisators). The primary judge dismissed this claim on the basis that, while Betfair had demonstrated that the use of a turnover benchmark was discriminatory, it had not demonstrated that it was of a protectionist kind."

In this case I was wrong, sorry.

Well, I guess on the basis of the objection (discrimination) he could not rule in their favour, but clearly on the basis of percentage of profits it is unfair.

It's how I went out of business selling computer parts.
The impact of GST was discriminatory for me because anyone who sold parts bought from Australia and ended up paying GST on profit only because they could claim the GST paid on the purchase.
As I purchased my parts overseas which were GST free, I had to bear the cost of GST on the entire transaction.

I find it hard to believe that Betfairs legal representatives went for the discrimination angle.

I also cant believe the Betfair managers allowed that angle to be played

That's plain crazy & totally without foundation.

It just wasted every ones time not to mention the massive expense in legal fees.
I would want my money back if that's the best legal advise available.


One - You have to prove it, which means they have to give evidence of being singled out from the others which would not be so, seeing that its a broad based tax.

I feel they could of taken an angle similar to a co-op operational business.
Run by the members, for the members.
This is what makes it distinctively different to a point where a Turnover Tax on the Betfair model of operation would render it untenable.

To enforce a turnover tax on a business that does not profit from turnover would then maybe argued that their position should be looked at differently & therefore taxed differently.

They could have argued more successfully by stating that their business model is totally different to TABS & Bookmakers.

Betfair's turn over is based on lots of five percents, after the outcome, not prior to outcome ,therefore Tax should be based on 1.5% of 5%.
e.g. 5% = $100,000 income x 1.5% = $1500 Tax to be paid.

Because the business structure is based on the ebb & flow of Back & Lay transactions, unlike Bookmakers where their profit percentage is built into the price being sold.


Does the Tax wish to be applied to the Lay bet turn over or does one Tax the Back bet turn over only or do they wish to Tax both Back & Lay which would then make it a form of double taxation if a punter where to Back & Lay the same runner.

I don't believe the learned parties where totally abreast of how an exchange actually works when it comes to Back & Lay betting.

Why is all the thinking left up to me around here.

Well another point of view may be that the High Court, which I assume now has intimate knowledge of how BF makes a crust, concluded that the 1.5% could successfully be absorbed by BF etc & they could continue on business as usual...

We shall see

The Racing Industry had made it very difficult for Betfair to operate in Australia.
The Racing industry is now making it very difficult for Betfair to continue operating in Australia.

I see it as the Turnover Operandus is irrelevant.

It is no coincidence that Victoria followed NSW example.
I see it as the Racing Industry simply want Betfair out.

I don't quite see the motive , but feel that the Recent New Contract with TAB that mentions the possibility of TAB operating as a Betting Exchange may be at least part of it.
Part of the motive may or may not be a drift of TAB Punters to the Exchange Operators , and that may not be a good thing for the Australian racing Industry.

Like I said , it's not about Betfairs Turnover , but Betfair itself.

The racing industry has made their point clear. They want betfair out.
In the end unless their is an exchange running here I think most exchange participants will move offshore and trade the UK markets.

The tab's will not operate an exchange. They would have to bear the same costs which betfair is now facing. Not to mention the liquidity would be a lot less then that currently on betfair (look at betdaq for example).

In the end the educated punter loses out unless we move our money off shore into the UK market.

That revenue which would have gone to the racing industry in NSW and VIC is now lost.

Hopefully other states do not also adopt this stupid policy.

Its funny how the politics between different people in any business are usually to the deteriment of the business. In this case the politics are internal in the NSW and VIC racing industries and is a childish play to exact revenge on betfair. Its a "I'll show you" decision and unfortunately the punters are the ones who suffer as usual.

Agreed, hidden agenda.

Or like me , they now go to the corporates , the TAB Fixed Odds Betting or Totalisator.
Punters bet as healthily when Betfair wasn't around as they do now I figure.

I only bet Overlays so I don't care who provides it.
Just means there will perhaps be lesser betting opportunities.
Easily overcome by increasing my bet size.

yeh, nah, not convinced yet the impact on BF is a deathknell, lot of smoke & mirrors going on IMHO.

Only problem with the corporates is that they allegedly ban you if you are successful (not that I'd know anything about that :rolleyes: ).

And of course, all lay bets would be off.

Yeah , I wish I was banned :(
Maybe one day.
Maybe even you get banned one day Ocho - but probably would be for using a bot :)

Technically no, but they would cost a lot more. You can back every other runner.

That is exactly what I'll do.
I'm not desperate to find an Australian betting medium and in fact would deliberately avoid any exchange set up here by the TAB on principle and liquidity. Plus there would be additional setup costs etc for me and it's too complicated as I'm basically an automated layer.

They are forgetting that Betfair makes a significant contribution to Australian racing as it is without a turnover tax and that contribution will be lost.
The Australia racing industry can ill afford to lose money for the sake of "we want more".

HEAR HEAR!

Of course we have to wait and see what the response is from Betfair, but surely when the model is commission on profit on a race from one half of the transaction, a turnover tax can't be sustainable.
If Betfair pass on the tax, which they have to to be profitable, then after doing the sums in my situation, it's impossible for me to make a profit on Australian racing, traders, market makers and multiple backers and layers in the same race.
1.5% turnover tax equates to almost double commission.

Found the below article on another site, fingers crossed the approach described is adopted


Another option in the turnover tax debate

By David Nolan

When punters bet on any event they are competing against each other and it is the money wagered in various amounts on the competitors inthat event that creates the market. Bookmakers essentially act as aconduit for people wishing to wager on an event.They frame markets withan overound which gives them the mathematical advantage that allows them over time to retain a percentage of the money wagered. Bookmakers,Totes, and Betting Exchanges all are are conduits for punters to competeagainst each other. The punters aim is to back the winner. The bookmakersaim is to manage the money bet through him as effectively aspossible. Hence the term "bookmaker". In order for him to do that he has at times to trade the monies bet with him through other agencies (other bookmakers,totes or exchanges) to offset his liabilities. He may takebets of say 100k on an event but to limit his liabilities to anacceptable amount may need to trade a significant portion of that figure to balance up his book.

All bookmakers large and small, trade to offset liabilities. Eachbookmaker will operate to different business models regardingrisk/liability but all will have to trade to offset liability at somestage.

When I was involved in bookmaking in the UK through the seventiesand eighties a turnover tax was levied.To prevent the turnover tax being paid twice or more all hedged bets were deducted from the dailyturnover totals.

This is the only fair way to levy the tax. If a punter stakes 10k on a runner and the bookmaker hedges 5k of it with another agency he onlyhas a turnover liability of 5k. The other 5k is now with agency used forthe hedge.That agency may subsequently decide to hedge 3k of that withanother agency. The liability for the tax rests with the final agency.

The turnover tax for ease of collection is levied by the taxingauthority against the layer who may then offset it by levying acomparable tax on the backer.This used to happen in the UK where apercentage deduction was made on winning bets to offset the tax.In thecase of the proposed 1.5% turnover tax here in Australia that surelywill be absorbed by most agencies and offset by increasing the overoundin general or simply accepting that it will decrease profits.The taxtherefore is levied only on the LAY side of the book

If this system is applied to the exchange (Betfair) there should be no problem accommodating a turnover tax other that the obvious one of it being a tax andtherefore unpopular.A exchange trader may make multiple trades on anevent -accepting a liability and then offsetting it over and overagain.If for example he he takes 10 individual bets of $100 at 2.00 andthen offsets his liability 10 times at 2.10 he has traded successfullyto remove his liability and guarantee a profit of $50 by then accepting a final lay bet of $50 at 2.00. At each stage he has offset his liability and passed it on to another party except for the final lay bet of$50.It is this $50 that the turnover tax should be levied against asthat is the final destination for that $50.The other $1000 has beenpassed on and the tax should only be levied where it finishes.

The exchange (Betfair) needs traders to provide the liquidity itneeds to function effectively.The turnover tax will still be levied butonly on the real amounts that have been laid. When the exchange (Betfair) shows a "matched" figure on an event it is so totally misleading as tomake it virtually irrelevant as a huge amount of it is traded moneygoing back and forth.

The exchange (Betfair) has totally changed the betting landscapewherever it operates and allows player a range of options previouslyundreamt of. To say that it has stimulated competition would be anunderstatement it has been revolutionary in lowering margins in generaland has given the average punter not just the pro's a realistic chanceof finishing on the right side of the ledger. All serious punters use itat some time, some almost exclusively now as they have migrated fromconventional punting to trading. It's main negative here in Australia ispoor liquidity but that surely will improve over time.

The racing authority has had it's day in court and the tax is now adone deal. It is now time for the racing ministers in each state to stand up and show some leadership.It's in everyone's interests that we have a strong and vibrant racing industry here in Australia.That industry istotally reliant for it's future on the punting dollar and that ingeneral comes from working Australians.If we are going to be paying forit every time we have a bet then surely we have a right to have someinput into how these massive sums of money are distributed and the terms of trade that generate them. The racing ministers need to remind the racing authorities of whose money they are spending and asking them howthey intend to repay their chief benefactors by producing a product that will keep them engaged both now and in the future.

Competition is good for the consumer - the only ones opposed to it are the vested interests that benefit from the lack of it.If the exchange(Betfair) is forced out of the racing business here in Australia it will have a hugely negative impact on Australian punters and only benefitthe opposing vested interests.All the states racing ministers must bemade aware of what the Australian punting fraternity expect ofthem.There is no valid reason at all why the exchange (Betfair) cannotbe allowed to continue and contribute to Australian racing as I haveshown above.If it is forced out it will be because the other vestedinterests have had their way at the expense of the Australian punter.The racing ministers are elected representatives and need to be made awarethat we are watching developments and that we also have a vote and thatthere are a lot of us.Where I live in Far North Queensland the mostpopular male pastime is fishing. The wild rivers policy of the previousLabor government was hugely unpopular with anglers here.A common sightup here is the car sticker which reads "I Fish and I Vote". Punters need a voice here in Australia to protect their interests.

As I said at the beginningall punters are essentially competing against one another and inaccepting that, getting general agreement amongst them is probablyharder than "herding cats". Surely keeping the betting landscape openand competitive is one thing we can all agree on.



The exchange (Betfair) because of it's relatively low commissionstructure probably cannot absorb a 1.5% turnover model and retain it'scommercial viability. Some vigorous arm twisting by the ministers mightproduce a compromise that could be accepted as having merits all round, for example:

Betfair increases its commission on Australian racing by 1% acrossthe board ie the base fee rises to 6% the lowers proportionately to 3%.The other 0.5% is absorbed by Betfair

Betfair waives all of it's outrageous "premium charges" for businessconducted through the Australian wallet.This would make the Australianproduct attractive to the big hitters overseas and increase turnover and liquidity

David Nolan

Unfortunately this relies on polticians having commonsense.

Definitely not going to happen then Mark!! Ha ha

The Schmile

True Mark, a few of them do like a punt tho so lets hope at least one in a position of influence loves his/her BF account & despises the TAB's ;)...but wont be holding my breath...

The problem is that traders and scalpers are then advantaged and backers or layers of multiple horses in a race are disadvantaged again.

There is no way Premium Charges will be dropped anyway.

If anything there will be PC 4 or super duper premium charge to accomodate the levy.

This is only my opinion, but they need to start from scratch with commission and premium charges and restructure the entire method of fees which will fairly impact on all types of exchange users.
However, I don't think this will happen.

Very strange no further announcements forthcoming.
Perhaps they are going to try a different strategy based on the board meeting.

Deafening silence from Betfair since the High Court decision...why do I get the feeling the bomb will be dropped any day now...

although I found this paragraph from the ruling very interesting (enlightening?)

In the course of the litigation Betfair abandoned its contentions that the burden of the fee is such that it cannot continue profitably to offer wagering services on New South Wales thoroughbred racing and harness racing and that it is likely to exit from that market. Indeed, in cross-examination, the Chief Executive Officer of Betfair, Mr A J Twaits, agreed that Betfair had not reduced the number or type of horse races in New South Wales upon which it seeks wagers, nor had the licence fee affected the odds offered; changes by Betfair in its business strategy had not been driven or impacted by the introduction of the fee. Perram J made the following findings[22]:

"The respondents alleged that as at September 2008 and at the time of the trial Betfair would continue to take steps to expand its betting exchange system in relation to many different kinds of events. Mr Twaits accepted this in cross-examination and I find it to be the fact.
The respondents alleged that it was likely that Betfair would conduct its business with a view to building a customer base and increasing goodwill across the whole of that integrated business and, again, Mr Twaits agreed that this was so and I so find.
The respondents alleged that Betfair would consider which decisions to make in response to the race fields fee and, again, Mr Twaits agreed that this was so only if, however, Betfair was unsuccessful in these proceedings. I so find."

Yep, the silence is almost eerie.
It's like the calmn before the storm.

Although I have noticed some definite market changes recently, perhaps they kicked their bot into overdrive to compensate.
Wouldn't surprise me in the least.

Yes, the SP's last Saturday, although mostly negative were not as bad as the week before. The Doncaster, which last year I went into for something around $5000, but this year chickened out and only went in for $200, returned 113%. Very good but annoying.

Are you guys still managing to trade profitably?

Hi Mark,
Are you annoyed that it returned 113% or because you were Chicken.
Blak , Blark
It was only $5000.
LOL

BOTH !!!!

Get your amounts right @113% for $5000 means around $650 jumps in.

Just got the email - base commissions going from 5% to 6.5% on ALL Australian racing!