Hong Kong Jockey Club On The Ropes - Again

by Jeremy Hetherington-Gore, for LawandTax-News.com, Hong Kong

08 September 2004

Having crucified itself in 2002 by demanding - and getting - a monopoly on Internet betting in Hong Kong, the Jockey Club is now going cap in hand to the government for yet more help after a seventh straight year of declining betting turnover.

Financial Secretary Henry Tang Ying-yen attended the opening day of the racing season in Hong Kong and said he had been listening to the concerns of the Hong Kong Jockey Club hierarchy. Turnover at the season's first meeting was down 9.3% on last year's HK$874m.

The Jockey Club has proposed paying tax on gross profit rather than turnover. "We will not rule out any proposal, provided that it would not pose too much risk on our tax revenue and at the same time allow the Jockey Club to come up with more competitive products," said Mr Tang.

In 2002, in a futile gesture requested by the Jockey Club, Hong Kong's Legco voted to ban offshore betting, making it a crime to use the Internet or phones to bet with local or overseas bookmakers other than the Hong Kong Jockey Club, with penalties up to $30,000 and/or nine months in jail. The legislation was a blatant piece of protectionism designed to defend the Jockey Club's betting turnover. Because of the rise of offshore, Internet-enabled betting, the Jockey Club had seen its onshore (taxed) betting turnover drop by about 12% from a 1997 high of HK$92 billion. In 1999-2000, it paid HK$11 billion in taxes and HK$1.8 billion to charity.

Victor Chandler Chief Executive Michael Carlton said at the time that he thought the legislation represented "a huge missed opportunity for Hong Kong," calling the law the worst of all possible solutions, and saying that it would create a vast underground industry: "Some 300,000 people intend to bet on this summer's World Cup, and the only options they will have when the law is amended will be to bet with illegal bookmakers, or not to bet at all."

"They are really shooting themselves in the foot", said a spokesperson for William Hill. "This law cannot be enforced and it would have been better to have harnessed the betting through the Jockey Club rather than to make it illegal."

As predicted, this useless and restrictive piece of legislation has simply hammered nails into the Jockey Club's coffin. Since the betting sector used to contribute some 7-8% of tax revenue, the government should now come to its senses and impose a market solution on the hidebound dinosaurs in Happy Valley. But it won't, of course; like cucumber sandwiches and gin and tonic, some things are too sacred to touch.

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