Gambling in Suburban Australia

Research Report – March 2019

9. Benefits to the local community

This chapter presents evidence relating to the benefits of gambling venues to the local community. The benefits of gambling were rarely reported by participants but can be quantified through analysis of clubs' community benefit statements (CBS). These statements must be submitted by licensed clubs each year to report on revenue allocated to community purposes in order to receive a lower taxation rate than hotels.

The first section of this chapter considers the reports from participants relating to the benefits of gambling to the community, in the context of the wider evidence available to test these statements. The second section presents an analysis of CBS from clubs in each site.

Participant codes

Quotes from participants reported in the results section are coded to provide anonymous context with reference to the site (1 and/or 2), study categorisation (person who gambled [G], significant other [SO], local resident [LR], Vietnamese local resident [LRV] or professional [P]) and gender [M] or [F].

9.1 Reports of benefits from participants

A few participants described some income-generating benefits of gambling to community groups and governments:

Is it sort of a necessary evil to take the revenue from something like a pokies venue and put it back into the community? I mean, there is inherent value in it. (1LR)

I mean, the gambling industry does provide a lot of work. (2GM)

A small number also described that some people who gambled derived genuine enjoyment from the opportunity to use EGMs:

We have plenty of people who come in in their Merc who just for shits and gigs come in and chuck in like a hundred bucks 'cause they can. It's not everyone who plays the pokies is poor. (2LR)

Some clubs were considered more beneficial to the community than others:

I believe the RSL does good work in general and I believe their profits that they make are used in that environment of looking after ex-servicemen and women. I think it's a very big positive. (2GM)

The intrinsic community benefit at a sporting club generally is the infrastructure that it's providing both physical in terms of the playing fields and the changing rooms and everything that goes with it and the organisational infrastructure for the presentation of the competition. (1P)

As indicated in the quotes above, a small number of participants suggested that employment and the development of community amenity were some of the benefits of gambling.

Maintaining and renovating venues

Resources directed to maintaining the venue were acknowledged by some participants but the overall value of this in the context of the harm that accompanies this expenditure was questioned:

They upgrade their grounds and that sort of thing, which beautifies the area but, again, to what expense? It's always at the expense of someone. (1P)

The provision of a social space that is open late at night was described as positive by some participants:

I reckon they're fine … I know a lot of people are lonely and 'cause they're open until four, they can go sit there and they don't play and they do drink the coffee for free and they'll sit outside and either smoke other people's [cigarette] butts or - it's that loneliness. (1SOF)

Support for community and activities

A venue professional described the efforts made by the venue to subsidise local children to develop their sporting skills:

There's a lot involved with maintenance on them [sport facility], um, so we do all that for the [game]. Um, we subsidised a number of kids … last year $40,000 bucks worth, for their memberships ... And we actually get coaches over from … [overseas] to actually coach the kids and try and improve their skills. And that costs us - you know, we do put a certain amount of charge on it because we've got the kids here … We've got them here from 8.30 in the morning till 4.30 … We try to get the locals … down to look after them, you know … Admittedly they put money into the machines but being a club, whatever you make - and a lot of their money's around that too. They come in and you know, 'I'm coming to - I'm coming to make me donations for the week', you know. They come in to put their $20 or $30 through the machines but they also appreciate what we make. It goes back into the community anyway. It either goes back into improving the facilities here or doing something like subsidising the kids for [sport] or helping out with one of the school functions or whatever, you know. (1P)

However, not all were comfortable with accepting donations from the proceeds of gambling to support community groups, as this participant noted:

I would personally feel guilty taking money out of a gambling venue to run a craft group or something 'cause these people here are - you know, are they single? Are they a family? And the family are suffering? (1LR)

No overall benefits of gambling in the community

Overall, participants were generally negative in their attitudes towards gambling:

Even if they raise the money and can build schools and all that, on the other side they do more harm than what they do good. (2LR)

Gambling leads to stealing and a lot of bad things could happen … When you don't have money, you could do anything, including committing the crime. Even kill the wife for money. So gambling, I can't say it's good. (1LRV)

It's completely detrimental ... I see no benefit to having them whatsoever. (1P)

Not only has the poker machine taken over, it's actually taken away the role of the local pub as a social hub for small groups and people like that. (1P)

These sentiments align with other research on community attitudes to gambling in Australia (McAllister, 2014). Moreover, a recent statewide survey of Victorians recognised major forms13 of gambling as very harmful, with 80% of respondents agreeing that the number of EGMs in Victoria should be reduced (Thomas et al., 2017).

Many were cynical about the relationship between the regulation of gambling and the money derived by the state:

I think the government is too addicted to revenue from the taxes that they make out of it that they will never make waves or else I think that the clubs and pubs lobby have got way too much power, and they'll get whatever way they decide they want to go with it anyway. (2P)

Others were not convinced that the contributions by clubs to community purposes offset the harms:

It's lip service that the gambling venues say that they put back into the community … You don't put five cents in the dollar back in the community and say you're doing a public service. That's rubbish. (2LR)

That kind of tax break was brought by the gambling corporation. It was not the kind of tax break that the people asked for and it's not a fair tax break and I don't think that's right. (2LR)

Evidence from previous studies has also demonstrated that gambling is actually a net drag on the economy by concentrating spending in businesses that employ fewer staff than other like venues such as restaurants or other hospitality, effectively displacing economic activity in non-gambling businesses (Victorian Competition and Efficiency Commission, 2012). An earlier study also found that 3.2 jobs were created for every $1 million dollars of EGM losses, whereas 8.3 jobs were created for the equivalent amount of spending from the sale of alcoholic beverages and 20.2 jobs for every million spent on food and meals (South Australian Centre for Economic Studies, 2005).

Given the overall lack of benefits perceived by most participants, the next section assesses the operation of the CBS and whether it provides cost-effectiveness in terms of adequate benefits to the community, in line with the tax subsidy provided to individual clubs.

9.2 Community benefit statements

Under the Gambling Regulation Act 2003, Victorian clubs operating EGMs are entitled to a tax concession if they can demonstrate that at least 8.33% of EGM revenue has been expended on 'community purposes' (Victorian Commission for Gambling and Liquor Regulation [VCGLR], 2008, 2012). Claims must be outlined in an audited CBS and submitted annually to the VCGLR (VCGLR, 2010-2015a). The VCGLR publish the CBS on their website. The three allowable categories of claims (with Class A subset further) are:

  • Class A
    • (a): direct community benefits including donations, gifts, sponsorships
    • (b-e): maintenance of sporting facilities; subsidies for goods and services; voluntary services by members or staff; advice support and services by RSL to ex-service personnel and their families
  • Class B: indirect community benefits, such as capital expenditure
  • Class C: miscellaneous such as CBS auditing costs and reimbursement for volunteers.

Items falling into Class B and C benefits have been subject to questions about the legitimacy of some benefits to the broader community given the indirect nature of benefits associated with the operation costs of the venue (Livingstone, Francis, & Wynen, 2015). This typically incorporates operational costs such as staff wages and building rates/rent, renovations and maintenance or development. Furthermore, examination of CBS over time show that some clubs have submitted claims for Class B benefits directly related to gambling, which were specifically excluded as an allowable expense by Ministerial Direction in 2008 (VCGLR, 2008). A further 2012 Ministerial Direction provided additional clarity on the allowable items that can be claimed under each class of benefits (VCGLR, 2012).

In Site 1 there were three clubs, including an RSL, a sports (bowls) and a sports/cultural/social club. In Site 2 there were two clubs: an RSL and a golf club.

Table 10.1: Community benefits by site, 2015
  Total CBS items A, B, C Total Club EGM losses CBS ABC as % of losses CBS Class A as % of losses
Site 1 $1,815,497 $9,480,795 19.1 5.3
Site 2 $3,998,620 $9,888,922 40.4 8.7

Analysis of the CBS shows that the proportion of claimed items in classes A, B and C was 19% of club revenue in Site 1 and 40% of club revenue in Site 2. As a percentage of gambling losses, only a very small proportion of Class A 'direct' community benefits were made (5.3% in Site 1 and 8.7% in Site 2). Items under these categories included the cost of subsidised goods and services, voluntary work (sport, charity), and RSL welfare assistance in Site 1 and golf course maintenance and equipment repairs, meal subsidies and RSL welfare assistance in Site 2.

The bulk of items claimed fall under Class B and include capital expenditure, the provision of buildings and equipment and operating costs such as staff wages and utilities. These classes of claim typically provide limited benefit to communities, as indicated through their categorisation of 'indirect' and 'miscellaneous'. The overall proportion of CBS allocated to these indirect or miscellaneous costs ranged between 73% in Site 1 and 79% in Site 2.

Figure 10.1: Classes of community benefit claims in Site 1 and Site 2, amount of total CBS, by venue, 2015

Figure 10.1: Classes of community benefit claims in Site 1 and Site 2, amount of total CBS, by venue, 2015

Source: VCGLR CBS website, www.vcgr.vic.gov.au

A closer inspection of CBS shows that while some items appear to provide a genuine benefit to local members, such as medical costs, taxi services and haircuts for members at an RSL in Site 2, others were of questionable benefit to the wider community, such as ongoing maintenance costs for the golf course and gardening services. In 2011, a club in Site 1 claimed the cost of counterfeit money used at the venue as an operating cost (Class B) on their community benefit statement.

9.3 Summary

Participants reported that they were sceptical about the benefits of EGM gambling venues to the local community. Analysis of community benefits statements from clubs in both sites also raises questions about their benefit to the wider community. Further review of community contribution schemes and taxation mechanisms for clubs operating EGMs is warranted.

Most participants were sceptical about purported benefits provided by EGM operators to the local community. Reconsidering the status of EGM-operating clubs as not-for-profit entities was also raised in a review of Australia's tax system (Henry, Harmer, Piggott, Ridout, & Smith, 2010). This report argued that governments should consider ways to better capture economic rent (excess profits gambling businesses are able to generate (p. 58) and recommended that tax concessions for gambling businesses such as clubs should be abolished (p. 94). Our research supports the suggestion that subsiding local clubs already deriving considerable income through operation of EGM licences may not be the most efficient way to fund community activities.

The current taxation arrangements for clubs, and the language used to describe these arrangements, may give a misleading impression of the benefits of gambling. In some cases, these benefits are overstated. Our research supports previous suggestions that the primary function of donations and provision of community benefits is to act as a form of legitimation or 'alibi' for gambling (Kingma, 2004) because their actual value is questionable (Livingstone, 2017). The Productivity Commission (2010) argued that the gross value of social contributions by clubs is likely to be substantially less than the support governments provide to clubs through tax and other concessions.

Individual cases also warrant further investigation. For example, reports by one venue professional who participated in the study of the employment benefits of gambling are not substantiated by relevant economic data (Browne et al., 2017; Victorian Competition and Efficiency Commission, 2012).

There have been at least two significant reviews of the benefits of gambling, including reviews of tax exemptions for clubs operating EGMs. Both reviews recommended abolishing these exemptions on the basis that given the high revenues from EGM operations, clubs are not true 'not for profit' entities. They argued that there are more efficient ways of distributing resources to local activities than through these tax exemptions (Henry et al., 2010; Productivity Commission, 2010). Further review of community contribution schemes and taxation mechanisms for clubs operating EGMs is warranted.

13 Major forms of gambling in Australia are typically the highest grossing products, which include EGMs, casinos and wagering on sports and racing (horses and dogs).