The Gauteng province risks collapsing horse racing in South Africa with tax changes, says betting operator
- The JSE-listed Phumelela has told a court the Gauteng government is risking the horse-racing industry – across South Africa – with an 'unlawful' change to the tax regime.
- Gauteng wants to divert 3% on all horse race bet winnings from Phumelela to, ultimately, its own coffers.
- That will not only lose Gauteng money, but will affect everyone from race-horse owners down the company claims.
The Gauteng provincial government is risking the collapse of the entire 100-year-old horse racing industry in South Africa, the JSE-listed Phumelela says in court papers.
And Gauteng is doing that for a measly R77 million a year or so, the company says – which it will end up losing in the end too.
Phumelela on Friday filed urgent court papers to stop Gauteng from changing regulations on how a tax of horse-race gambling winnings is treated.
A 3% cut of all winnings in Gauteng were paid to Phumelela as part of a subsidy scheme set up after horse racing was privatised in the mid 1990s – until Monday. As of 1 April, that cut of the winnings go instead to the Gauteng Gambling Board, from where Phumelela believes it ends up in the province's coffers.
Without that money, which amounted to R77.3 million in 2018, horse racing in South Africa may be doomed, the company says.
“Phumelela is unlikely to sustain its current operations, including, in particular as a horseracing administrator,” it said in an application to halt, and eventually set aside, the change in regulations.
The Gauteng tax makes up some 90% of the tax subsidy Phumelela receives for the loss-making business of organising race meets. Without it, the company says, racing "may well be rendered economically unsustainable".
"Without Phumelela the sustainability of the entire South African horseracing industry is at risk," CEO John Stuart says in an affidavit.
The "grievous consequences" will eventually extend to Gauteng's coffers too, the company says, as revenues decline and the horse-racing betting tax dwindles.
Phumelela believes that the stakes for competing in a horse race will have to be reduced without the subsidy, which will make owners and trainers less likely to participate. This will reduce the number of horses in training, while also reducing the interest from both local and international punters.
Gauteng first publicly proposed changing the treatment of the tax subsidy, in place for decades, on 15 January. It published final rules on 28 March, and they came into effect three days later.
According to 2016 figures cited by the company, horse racing in South Africa employs some 13,000 people permanently, and more than 23,000 people in temporary jobs.
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