Crown Resorts hid $170m potential tax underpayment, Victorian royal commission told
Crown Resorts failed to provide to a royal commission legal advice that it may owe Victoria hundreds of millions of dollars, the inquiry was told.
Crown Resorts has potentially failed to pay up to $200m in state gaming taxes, and attempted to conceal legal advice about the “possible underpayment” to the Victorian royal commission into the gaming giant, the commission has heard.
In February, the James Packer-backed company recruited Crown Melbourne gaming machines executive Mark Mackay to examine the potential tax liability arising from the casino’s practice of deducting the cost of loyalty program benefits from taxable poker machine revenue, following legal advice from firm MinterEllison on the issue.
Mr Mackay told the commission on Monday that between 2014 and 2019 Crown may have underpaid the gaming tax by at least $167.8m, and that “it could be over two hundred” when encompassing FY20 and FY21.
He helped produce a spreadsheet detailing this information after a request from Crown Melbourne chief executive Xavier Walsh on the morning of February 26, 2021, four days after Victoria announced the royal commission, but said he couldn’t recall if he was asked to do it before the commission was launched.
“I assume it was close to the time period, I just can’t recall when I was asked,” Mr Mackay said.
Counsel assisting Geoffrey Kozminsky asked Mr Mackay why the MinterEllison legal advice was not produced in response to a request from the commission in March on any potential breaches of Victorian casino legislation when the issue was already being examined internally.
“You agree when the commissioner issues a request for information Crown is duty bound to take all possible steps to provide all relevant information?” he said.
“So you agree by not providing the advices it has received from its external lawyers about this issue, Crown failed to discharge that (duty)?”
“If they didn’t provide under the assumptions you specified to me, then yes, that would not be in line with that requirement,” Mr Mackay replied.
“There was no acceptable excuse or explanation for that failure, is there?” Mr Kozminsky said.
“I couldn’t think of one, no,” Mr Mackay replied.
Mr Mackay said Crown maintained it was entitled to make the deductions, but said a review was conducted in part due to the “ambiguity” over whether costs associated with providing free accommodation and parking to premium players could be classified as winnings for tax purposes.
His inability to recall details of specific conversations earned a rebuke from Commissioner Raymond Finkelstein.
“I can’t appreciate how it can slip your mind so easily. And it’s not an ancient conversation, it’s a conversation that happened in recent times,” Mr Finkelstein said.
Following a brief closed session to examine the MinterEllison advice, which is under legal privilege, Mr Kozminsky probed Mr Mackay about policies regulating the more than 2600 pokies at Crown Melbourne, which are permitted to exceed the $5 maximum per spin bit that applies to machines outside the casino.
Most of Crown Melbourne’s machines have a $10 maximum limit - but more than 1000 have no limit provided the patron uses a card to set a maximum time and spend allowance.
Mr Mackay conceded this arrangement increased gambling harm at Crown Melbourne, and agreed Crown could have done more over the years to foster responsible gambling and harm minimisation.
The commission heard that although Crown stopped issuing branded picks patrons could jam into a pokie to avoid having to press play at each bet, players were still permitted to use their own picks or other items in the same way, while customers in premium rooms could play on one poker machine at one time.
“In the teak and mahogany rooms, some of our customers have access to an ancillary card, therefore some choose to play multiple machines at one time - that is still an allowed practice in those premium rooms,” Mr Mackay said.
Mr Mackay also said he believed Crown’s recently cancelled red carpet program, which facilitated group bus trips of senior citizens from community centres to the casino, was designed to encourage them to gamble.
“Can you agree with me, designing this program, the aim was to have senior citizens come into the casino and gamble and lose more than the cost of running the program?” Mr Kozminsky asked.
“Yes, I do not believe that was being run as a loss making,” Mr Mackay replied.
The commission comes as Crown was hit with a second formal investigation from financial crimes regulator Austrac over money laundering fears at its Perth casino earlier on Monday.
Crown also said on Monday it most likely breached Victorian casino regulations by receiving payment from the debit or credit cards of international guests at Crown Melbourne’s Crown Towers Hotel, with the funds then available to the patron for gaming at the casino, although this practice was discontinued in 2016.
The commission continues on Tuesday.
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