Thursday, April 22, 2010

Body blow to western India racing

The greatest danger to the sport of horse racing is not the so-called social stigma, nor the sport's image as open to 'fixing', nor its inefficient management by race clubs, nor its dwindling customer base. It is the fact that the sport is at the mercy of its lincensing authority (state government) whose greed knows no bounds.

Horse racing in the state of Maharashtra may soon be extinct.

Already reeling under heavy levies, horse racing in Maharashtra was delivered yet another body blow by the state revenue department this month when the betting tax was doubled from 10 to 20%.

Ostensibly, the state government has taken this step hoping to boost their income. But the move clearly shows the revenue department and its advisors have not done their homework properly.

All over the world, any government's income from horse racing has been inversely proportional to the level of betting tax--lower the tax, higher the income; and higher the tax, lower the income. The most shining example has been that of Hong Kong where low level of betting tax ensured that the government got a revenue of HK$ 8.12 billion last year, besides which the Hong Kong Jockey Club (HKJC) paid another HK$ 707 million to charitable trusts. With only 78 days of racing in a year, Hong Kong racing generates a turnover of over HK$ 108 billion thanks to charging one of lowest tax rates in the world (7.5% only).

In our own backyard, there is another striking case of the Bangalore Turf Club (BTC) which saw its coffers overflowing when the Karnataka state government in 1994 allowed them to charge only 5.5% betting tax. Within five years, the betting turnover zoomed from merely 12 crore to over 1,000 crore in a span of only five years--an increase of over 8,000%! The BTC is today India's strongest tote center and Karnataka government is a deserving beneficiary.

The hike in betting tax is guaranteed to be a lose-lose situation for both the Royal Western India Turf Club (RWITC) and the state government. With the proposed 20% betting tax, even if the RWITC continues to charge the same 6% commission that it presently does, the Tote tax level will rise to 26%, and more and more betting money will now be driven into the illegal bookmakers' channels who charge zero percent tax.

By this ill-thought out move of doubling the betting tax, the state government is throwing only two options to the hitherto honest Tote punter: either be a fool (and bet on tote and pay 26% tax even on a losing bet) or be a cheat (bet with an illegal bookie and don't pay a penny as tax either on the bet or on the winnings). The real danger is that more and more punters may choose to be cheats rather than fools. And if it happens, the coffers of the RWITC will gradually dry up to such an extent there will be nothing for the government to scoop up from the club's bowl.

(c) MiD DAY


  1. Classic Example of 'Penny Wise Pound Foolish'.

  2. These bureaucrats went to tier-2 or tier-3 colleges, most likely the latter. And their politician-bosses probably are drop-outs. So, how can one expect them to undrstand simple maths. And Gosaviji, you don't have to go to HK to understand relationship between tax rates and revenue. Our own VP Singh as Finance Minister started the trend by lowering the income tax rates nad GOI has not looked back since. As the exemption slabs kept going up and the rates came down, the revenue collection has been going up and up. The other example is that of excise duty being slashed on cars and look at how automobile industry, auto parts industry, and steel industry have benefited from the zooming sales of cars! Why don't you highlight this in Mid-Day, sir?

  3. Convince this Govt to bring down the tax to 8% for three years and see the difference.


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