How about... Tax?

"if this were a business you owned you would not be fixing anything thats broken."

So Jack, you believe everthings hunky dory and that bookies don't need to contribute any more to the Stakes pot - like the Tote does - and therefore nothings 'broken'?

Jim
Not at all!

I may even agree with you, but ABC can be very one sided and it's not unreasonable to test another man's statements especially is they are important and far reaching.

It's at least reasonable (after your proposal) to ask if you know how much the stakes pot is and how much bookies contribute.

I tried to find it by searching reports from National gambling Board and P and GC Directors' reports, but it's not mentioned. The bookies have a poor online presence as a collective.

Jack, I agree - for instance just how much is returned from the 'overseas' transmissions? I live in the UK, and it would be nice to know exactly what that amount is?

As far as the 'local' Stakes return - working on the figures mentioned of R5billion rand 'Tote' and R3billion 'Bookies' for a total of R8billion

I assume that @3% (50% of tax) = R240million p/year returned as a direct result of this source.

However, others write that another percentage is taken from the 'Tote', so my question would be where does that money go?

Obviously upkeep of track - welfare of horse and personel will benefit from said cash (I would hope!). But is there another amount gleamed for stakes from this 'pot'?

Many questions, but very hard to see the answers - so if anyone knows, chapter and verse, where to access these facts and figures I'm all ears!

Respectfully, Jim.

seeing nobody sounds like they know all the facts and figures, myself included, can i bore you with the figures that i do know, in an attempt to compare apples with apples.

the tote's percentage of the pool is NOT a tax, it's tote revenue: what it costs punters as a group to have a bet. tax is charged TO THE TOTE at 6% of its revenue (law), and stakes contribution at 30% (agreement with RA).

tax and stakes therefore depend on HOW SUCCESSFUL THE TOTE IS AT MAKING MONEY, and have nothing whatsoever directly to do with turnover. sure, the tote's revenue comes out of the pools at a percentage of turnover, but if the tote thought it could increase its revenue by reducing the take out % (making it cheaper to bet and paying bigger winnings) then tax and stakes would increase overall in the same proportion, regardless of what the turnover was that generated that revenue.

the bookmaker's percentage overround is obviously not a tax either, it's his revenue. the overround is the bookie's mark up: the price his punters have to pay for having a bet. but with fixed odds, punters have to pay tax AS WELL AS THE OVERROUND, and they are taxed on whatever the bookmaker loses.

in other words tax and stakes DEPEND ON BOOKMAKERS BEING UNSUCCESSFUL. seeing bookmakers are obviously in business to earn a living from racing (and very few punters are), this must surely be the wrong business model from racing's perspective.

the other effect of the punter tax (aside from legalised discrimination against the fixed odds punter) is that it makes it impossible for bookies to compete against the tote. the tote "prices up" at 125%, or 118% on win/place. so the bookmaker must price to 112% on w/p bets, before the tax, in order to match the tote. that would be a tall order for William Hill, let alone Ricky Sims. is it any wonder the overrounds go to the other extreme where the bookie never fills his book, with half a book he has fewer horses running for him, and the punter is fleeced as quickly as it is possible to do.


be that as it may, we still haven't got a way to compare apples with apples. let's say the bookies are pricing up on average to 130%. so 70% of turnover should be returned as winnings to the punter, and 6% of 70% goes to tax and racing. that's 2.1% to tax and 2.1% to racing, compared to 30% margin to the bookie. overall, therefore, out of the pie as it stands today, racing receives a proportion equivalent 2.1/30 = 7% of bookmaker's revenue ON AVERAGE (that is, if the bookmaker was to pay it).

but this is extremely sensitive to to the actual overround, and as noted above, from racing's perspective it runs opposite to the what the bookmaker is trying to do which is to make money by charging as much as he can get away with. at 120%, 6% of 80% = 4.8% to tax and racing = 2.4/20 = 12% of bookmaker revenue to racing. at 110% it is 27%. and another 27% would go to provincial coffers. can you imagine anyone pricing up on this basis, even if you pass a law?

what does the stakes pot get out of all of this? well, seeing the punter tax gets paid half to tax and half TO THE TOTE (by law), and 30% of what the tote makes on SA racing is paid to stakes, i guess 30% of 3% = 0.9% of punters winnings eventually find their way to stakes. exactly what this amounts to depends HEAVILY on the overround.

obviously any bookie is going to resist the suggestion that he should pay to tax and stakes out of their own pocket, because he doesn't have to now. but if you look at the structure that racing has created for itself, i don't think you can entirely blame the bookies for the current situation.

on the other hand, what incentive do the totes have to change the situation - punter tax is a revenue stream collected for them by the fiscus and earned from customers that aren't theirs, it allows everyone to complain that bookies don't contribute enough, and at the same time it creates a systemic competitive advantage that prices bookies out of the market.


Er, for 25 marks... discuss.

Can you clarify a few?

1. tax and stakes therefore depend on HOW SUCCESSFUL THE TOTE IS AT MAKING MONEY, and have nothing whatsoever directly to do with turnover

Umm..Surely a totilisator is ALL about turnover. Their revenue is NOT determined by the result, but by a percentage of the pool each time a race or exotic is closed. It pays out a %, and then takes the same money over again. ALL turnover.

2. in other words tax and stakes DEPEND ON BOOKMAKERS BEING UNSUCCESSFUL

Umm..perhaps not? You could have a sequence of bets as a punter, say win 100K, lose 100K with two 1/1 bets. As a punter you will be -R6000. The bookmaker will be square.

If you keep churning all the millions of transactions, you are completely wrong. In fact, bookmakers can win and the tax will still churn... umm as it actually happens.

And ofcourse, the if the bookmaker does win, he has to pay 14% vat on profits before income tax. It is ofcourse, a massively taxed business unfortunately.

good points:

1. agreed that the 75% is paid out and then the punters give it all back to the tote again. so effectively as a group they "spend" 25% each time until it is all gone. for the punter, he has to decide if he wants to lose his money at that speed in the long run, when the casino slot machines will pay him 90% back and keep just 10% per bet in the long run. so at the casino he gets to play more times for the same money (in other words much higher turnover), feels like he's getting more entertainment, and stays a bit longer.

the question for the stakes pot is whether the punter might decide to spend more on racing overall and less at the casino if the tote made a big song and dance about making betting on racing cheaper.

as you say yourself, regardless of the take out, all winnings are recycled back into the pool anyway, so at worst you can reduce takeout and the tote's revenue stays the same. so you could reduce the take out, and turnover would multiply because everything is recycled, and once the punters had lost all they came with the tote revenue would be the same: this is the basis on which I said turnover alone means very little, other than a reflection of how often punters' money is recycled. but the way turnover interacts with margin is definitely crucial.

actual racing experience aroudn the world (UK, HongKong, Australia) shows that punters actually spends more in the long run when betting costs less. it makes sense: casinos, a far more competitive industry than racing, take much more money on their high t/o low margin slots than on higher margin machines.

2. agreed for your 2 bets, but if the horse was actually a 3/2 shot but the overround meant you only got evens, the bookmaker has kept R50k in his pocket, when 6% of that R50k should have gone to tax and racing (and 94% to you). okay, sure, you had the bet because you thought evens was worth having, but i don't care what you say the bookie still had a margin on that runner. if you multiply that by all the bets taken by all bookmakers on a 130% or more book, 20 races a day, 360-something days a year...

VAT is a good point, but the effect is not relevant because the tote pays VAT too on the same basis. anecdotally, one hears that bookies are good at putting through late losing bets on the winning horse to reduce their VAT. that's a fault of poor regulation and if it is true bookmaker fraud is not exactly a sound economic basis for racing to continue charging fixed odds punters on win. the fact that the bookie prefers to pay 6% on a made-up losing bet than 14% on his profit also helps prove that racing is perversely better off at present when bookies make smaller margins.

imo, better to change the tax so bookies and tote all pay the same to stakes and the same to tax.

any help?

We should clarify 'tax'.

Of the 25% (to 18%) take-out of the tote, it pays VAT, Direct Tote expenses, and then a Kick-back to Race Operators for Stakes and Running Costs and then TAX.

It's pointless to make a direct comparrison to bookmakers, because the tote cannot lose, it's income is a function of turnover.

A bookmakers income is also NOT a direct function of an overround book. So one can never say that if the average book was 130%, that bookmakeres are making 30% profit on turnover.

Also, the less depth in a market, the more a bookmaker gambles. And when money horses arrive as they can on good going, bookmakers can have long losing runs. Obviously they must make a profit overall, or go out.

Isn't the real question here whether or not bookmakers are contributing a "fair' amount to keeping racing going seeing as they benefit, and we might use the tote as a reference point because it's also punter driven?

I wish the bookmakers would show the figures to convince the market one way or the other. I know for eg, that tellytrack is pretty much financed 50-50 by race operators and bookmakers.

the tote has to pay all of those things, and its shareholders as well, out of the take out, but not necessarily in that order - i believe that tax to the province for example comes first, and stakes second, with operating expenses and VAT following.

but (aside from certain fixed cost overheads that any business faces) they are not fixed amounts which oblige the tote to charge the punter as much as it is permitted to by law, and i believe that a proper business organisation would attempt to price the tote product against competing gambling opportunities by setting take out in such a way that it earns as much revenue (being a function of turnover AND MARGIN) as possible.

as for the contribution to racing from fixed odds, indeed a lack of depth in the market puts the bookmaker at greater risk. but regardless of whether the bookmakers actually make 30% on turnover, if the PRICES in the book carry a 30% margin then that is the degree to which tax is reduced to the detriment of racing under the current structure.

unfortunately, i don't believe the bookmakers have the evidence available to convince anyone and i would challenge them to do so - with a few exceptions most of them don't understand their own business, let alone the industry of racing or the economics of ownership.

to me, all should pay the same amount TO RACING, set at a fair level. it is very difficult to determine what this is when the tote and racing are one and the same, but conceptually, both tote and bookmakers ought to be paying the same proportions, based on the overall amount they persuade the punter to part with having paid all winnings.

under such circumstances the resultant competition ought to make the game more appealing to those who have long since gone to the casinos.