Hong Kong Jockey Club raps ‘greedy’ Treasury

By Murray Bell, South China Morning Post (11th April 2004)

The Hong Kong Treasury was yesterday accused of callous disregard for the world's best racing-wagering product by the Jockey Club's executive director of racing, Winfried Engelbrecht-Bresges.

At the end of another excellent 10-race programme on Easter Sunday at Sha Tin, where the racing was crisp and competitive, Engelbrecht-Bresges was forced to admit to yet another turnover drop, with the Jockey Club holding just $857.5 million. Not long ago, a Sha Tin turnover of less than $1 billion was unthinkable.

The year-to-year decrease may not look too bad on paper because it was only down 1.1 per cent on the Easter meeting 12 months ago, but what made it so appalling was last year's meeting was emasculated by the knock-on effects of Sars in the region, and a turnover increase this year had been anticipated.

"This is incredibly frustrating," Engelbrecht-Bresges began. "Everyone who comes to Hong Kong, from anywhere in the world, tells us this is the world's best racing product. We are doing everything we can to make this great product even better, but what racing in Hong Kong urgently needs is a change in our taxation.

"We are now operating in a totally different gaming environment to what existed previously," he continued. "Hong Kong now has soccer betting, and they are two completely different products that attract completely different levels of taxation.

"Internally and externally, the level of taxation on Hong Kong racing is too high and we told the government this three years ago, but still they refuse to listen."
Engelbrecht-Bresges made no apology for his hard-hitting outburst, but added "the situation is now becoming critical and someone needs to say it".

Racing is in its sixth successive year of decline, yet repeated representations to government have fallen on deaf ears. With a take-out of 18 per cent on win, place and quinella betting, and more than 20 per cent for the so-called exotic bet types, like treble, double trio, triple trio and six-up - among the highest take-out rates on the planet.

Jockey Club officialdom is still seething that former financial secretary Antony Leung Kam-chung, in his first and last Budget in 2003, raised the take-out from exotic bets by a further percentage point without consultation with the Club.

The take-out from wagering - of which approximately two-thirds is tax and one-third goes to the Jockey Club to pay for overheads and prize money - is the pricing mechanism of the product. Horse racing is one of the few industries of the world where the actual business has no control over the price of its product.

The faceless men and women of the treasury hold these strings. And despite a recent report from the Jockey Club recommending a substantial drop in the take-out rate for Hong Kong racing - and a list of likely benefits if the recommendation was adopted - the treasury has again refused to budge.

"Their reply to us is that the average punter has no idea about the pricing of the product," Engelbrecht-Bresges continued. "Well, I disagree. My 10-year-old daughter would be able to see the sense in this. There isn't a punter, anywhere, who wouldn't prefer a dividend of $40 compared to $35."

Engelbrecht-Bresges, regarded as one of the best racing administrators in the world, is about to enter his seventh year as executive director of racing at the HKJC. The taxation issue, he says, remains the biggest single issue that is holding Hong Kong back.

"This year, we have had a 40 per cent increase in the number of members who wish to own a horse - that's a very encouraging sign," he said.

"We are committed to a massive upgrading of facilities for our owners because we know these are our biggest investors and our most important customers.

"Looking at it from the other side, I appreciate that this is not an easy decision [for government]. Reducing taxation on horse racing may not be an easy thing to do politically. But this needs to be done.

"We at the Jockey Club have taken wage cuts, the trainers and jockeys have had pay cuts, we have become more and more efficient in our management. We have made cost savings and improved productivity in many areas and been recognised for this. We have a clear structural problem and the solution lies in the take-out rate that applies to racing being too high.
"There is more competition on the horizon, too. When we were in Macau last week for the running of the Macau-Hong Kong Trophy, we were given an insight into the new casinos there," he continued.

"The price structure [i.e., take-out rate] of Hong Kong racing was set in a completely different era when racing was the only game in town. The government seems to operate under a set of assumptions [about racing] and I'm sorry to be so blunt about it, but they are simply wrong."