Taxing ‘misery’: Pokies and the NSW budget

Dominic Perrottet makes no secret of his misgivings about how much revenue his government raises from taxes on poker machines.

At a breakfast in April hosted by the Wesley Mission charity, the premier said he’d “rather not get any money” from gambling revenue.

NSW Premier Dominic Perrottet says poker machine revenue is taxing “misery”.Credit: Brook Mitchell, Nick Moir

“The fact that there are more pokies in NSW than almost anywhere in the world is a complete travesty,” he told the audience at the time. “It’s a real political challenge.”

In October, as debate over poker machine reform grew more contentious, he acknowledged the government was failing problem gamblers.

“In essence, we’re taxing on the misery of others,” he said. “I always found that difficult. I still do. We need to do better.”

Despite the premier’s qualms, the poker machine revenue flowing into the NSW government coffers is on the rise.

The state’s gaming machine tax, which is paid on the metered profits of gaming machines in clubs and hotels, is forecast to raise $2.03 billion in 2022-23, about $500 million more than the previous year. That’s just over 5 per cent of the tax collected directly by the NSW government.

Gaming machines are also one of the state’s fastest growing revenue sources. The latest budget forecasts average annual growth of 14 per cent over the next four years.

In June, the amount of poker machines revenue expected from clubs and hotels was lifted by $423 million over the next four years because of the strong recovery in gaming activity in the wake of pandemic restrictions and “expectations for household disposable income”. Poker machines in clubs are taxed at lower rates than those in hotels.

Poker machines will contribute more state revenue in 2022-23 than all other gambling taxes combined, including racing, casinos and lotteries.

Political pressure for poker machine reform has intensified since a NSW Crime Commission report in October recommended the introduction of mandatory cashless gaming cards to reduce money laundering through electronic gaming machines.

Perrottet has since backed the mandatory card. Details of its introduction have not yet been announced.

The commission’s report found about $95 billion flowed through poker machines in pubs and clubs in the state in 2020-21. It described NSW as “the gambling capital of Australia”.

The Perrottet government raises more from poker machines per person than other states and territories. Revenue per capita from electronic gaming machines in NSW pubs and clubs was $221 in 2019-20, the latest analysis by the Queensland Government’s Statisticians Office shows. That compared with $159 in Queensland and $143 in Victoria. Poker machine revenue per capita from NSW clubs and pubs was 42 per cent higher than the national average in 2019-20.

In Western Australia, poker machines are banned in clubs and pubs, so the government in that state gets by without any revenue from that source.

Governments have long relied on “sin taxes” levied on gambling, tobacco and alcohol.

The distribution of poker machine turnover suggests a high share of taxation from this source is paid by players on relatively low incomes. Official data leaked earlier this year reveals more than a third of poker machine turnover in Greater Sydney in 2019-20 was in three local councils with relatively low household incomes – Fairfield, Canterbury-Bankstown and Cumberland.

Independent economist and budget expert Chris Richardson said sin taxes, like those on poker machines, tended to be less of a drag on the economy compared to some other forms of taxation.

But the pervasiveness of gaming machines in low-income areas, and the prevalence of problem gambling, make poker machine taxes highly regressive, meaning they impose a higher burden on the poor than the wealthy.

Richardson said: “You are not just taxing many problem gamblers; you are indirectly taxing those who depend on them, so you’re actually making poverty worse. Ultimately, the problem is that we have too many pokies in the first place.”

Poker machine reform advocates say there is growing community support for change.

Stu Cameron, chief executive of Wesley Mission, which provides gambling counselling as part of its charitable work, said far more poker machine revenue should be directed to preventing and treating gambling harm.

“From today, any increased tax revenue and windfall fines must be directed towards mitigating gambling harm,” he said. “We must remember that the source of this tax is creating harm, and no government should depend on income from such a source to plug other gaps.”

There are also calls for the NSW government to use gambling revenue to fund a fully independent body to research how harmful gambling could be reduced, and to advise on gambling-related policies free from the influence of vested interests.

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