Star Entertainment shares dive on $364m NSW casino tax hike

A ‘blindsided’ Star Entertainment is demanding an urgent meeting with the NSW treasurer over his proposal to hike casino taxes.

Shares in Star Entertainment fell almost 18 per cent on Monday, the first day of trade after NSW said it would hike casino taxes in a bid to raise $364m over three years.

NSW Treasurer Matt Kean said the government would increase tax rates for the state’s two casinos from July 1, 2023, to raise an additional $364m over three years.

“These reformed tax rates will replace the existing regime under which casinos pay less tax on poker machines than hotels and clubs,” he said.

“These changes will ensure that the casinos continue to make an appropriate contribution to the community and support the delivery of vital government services.”

However, Star Entertainment said it had not been consulted on the proposal and noted no detail had been provided about how the taxes would be levied or applied.

“The potential impact of these proposed changes, if implemented, will depend on the details of the proposed reforms and the implications to pre-existing arrangements which apply to The Star’s operations in Sydney,” the company said.

Star Entertainment chief executive Robbie Cooke hit back at the proposal and show Mr Kean determined the financial modelling of the taxes.

“We are not sure how the government modelled its financials nor the basis for suggesting The Star does not pay its fair share of taxes,” he said.

“Specifically, in addition to state gaming taxes, The Star also pays millions in corporate taxes, with total taxes paid as a percentage of The Star’s profits being around 70 per cent, and as high as 80 per cent in the last five years when all the tax regimes are considered.”

“The Star is seeking to urgently engage with the NSW government as to the sustainability of the proposed tax changes and the impact on The Star’s business as The Star seeks to fast track cashless gaming and carded play to deliver safer gambling, whilst also continuing on a remediation path to return to suitability and earn back the trust of the community.”

However, before Mr Cooke joined the company from Tyro Payments in October, a royal commission-style inquiry into Star heard that it underpaid millions of dollars in state taxes after it misclassified local patrons as international high rollers.

The war of words with the NSW Treasurer comes as Star is desperate to repair its relationship with the state gaming regulator, which has suspended the licence for its flagship casino in Pyrmont and fined it $100m.

The Australian Securities and Investments Commission has also legal action against the group’s current and former directors and executives in the Federal Court on Tuesday, alleging they oversaw a major expansion in the relationship with figures that had criminal links without addressing money laundering concerns

The ASIC action sparked the departure of chairman Ben Heap – who was the only director signalling that he would stay at the company in the aftermath of the damning inquiry into the company headed by Adam Bell SC.

Meanwhile, it is facing a separate Federal Court lawsuit from the financial crimes regulator Austrac after accused sex slave traders, a murderer for hire, loan sharks and drug traffickers were allowed to gamble billions of dollars at Star Entertainment for years, despite details of their crimes being publicly available.

A spokeswoman for Crown Resorts said the company would review the proposed tax changes. The company has pre-existing tax guarantees with the NSW government of at least $1bn over the first 15 years of operation.

“Crown will review the proposed tax changes announced by the NSW government. The impact of these changes will depend on the final details of the tax and other pre-existing arrangements we have in place at Crown Sydney,” the spokeswoman said.

“Crown Sydney does not operate electronic gaming machines or pokies at our VIP-only casino in Barangaroo.”

Star Entertainment on Friday also noted Nick Weeks, who was appointed as independent Sydney casino manager for 90 days from October 17, would remain in the role for 12 months to January 19, 2024.

Mr Weeks was also appointed manager of Star’s Queensland casinos this month.

Its shares closed 18 per cent lower at $2.12, giving it a market value of $2.02bn, in a lower market.