Gambling tax 'will kill the fourth-largest sport in the country'

Horse-racing authorities say the entire sport - including blue riband events like the Durban July and J&B Met - will be "killed off" by the new gambling tax introduced by Minister of Finance Pravin Gordhan this week.

And casinos and sports betting bookmakers have also expressed shock, saying punters "invest" years of small losses before their big payday.

In his Budget speech, Gordhan announced that 15% of all winnings of R25000 or more, including lottery winnings, would be withheld from winners, starting in April 2012.

He said the measure was in line with other countries, including the U S , and added: "I hope it will assist in discouraging excessive gambling."

However, while betting losses can be claimed against the tax on winnings in some US states, Treasury official Cecil Morden told the Sunday Times "I don't think we want to go that way."

Currently, bookmakers must already deduct 6% of their clients' winnings in separate provincial taxes.

Rian du Plessis, group chief executive of Phumelela, which operates and controls horse racing in seven provinces, said: "We will seek an urgent meeting with the minister to explain that he would be destroying the fourth-largest sport in the country, along with thousands of jobs."

Du Plessis said he was "hopeful of a solution", adding the sport was already "in decline" in South Africa, with operator profits down .

He said horse racing was largely funded by "tote betting", in which punters lay daily bets as low as R6 "for sometimes 30, 40 years" in the hope of a payday.

"And it's precisely that big payday that would be hammered by this tax," he said.

One of the country's leading professional punters - who asked not to be named owing to existing legal wrangles with SARS - said he would stop his average annual spend of R3-million on the tote if the tax were implemented. "The government perceives anyone in racing to have money, and this is a straight wealth tax ... (it) will annihilate the sport."

He said the R5-billion-a-year industry could not afford to take such a hit. "A punter who loses R5000 on the first nine races is down R45000, and when he wins R25000 on the last race, he'll be expected to hand over 15% of his winnings, irrespective of the previous losses."

Treasury spokesman Jabulani Sikhakhane said: "From a tax point of view, we cannot differentiate between different forms of gambling. Betting on horses is gambling."

Lisa Haines, a director of the country's largest sports betting outlet, SportsBet, said 20% of her client base - representing over 1000 gamblers - would have at least one win of over R25000 every month .

"It's ridiculous. This is now a third tax on bets after VAT and the 6% gambling tax we've had to pay to the province for the past three years."

Haines said the only positive element for her industry was that the lottery would now be subject to the same legislation.

Derek Auret, chief executive of the Casino Association of SA, said there had been no consultation with the industry. "When the minister mooted the idea last year, we immediately sent a letter expressing our input and concerns, but we heard nothing more about it until the announcement."

Auret said casinos, which employ about 30000 people, were heavily taxed. "The government already gets 37% of revenues generated by casinos."

Responding to accusations of "blind-siding" the gaming sector, Morden said: "It's difficult to consult on something entirely new. Obviously, we will do quite a lot of consultation now, looking at administrative implications and exploring all options."

He said the internal review which led to the announcement saw analyses of gaming taxes in the Netherlands, the US and India, in particular. "We think 15% is a reasonable figure."