William Hill, the global British betting firm whose Australian operations are headed by prominent Sydney racing identity Tom Waterhouse, has struck a secretive financing deal to funnel millions in punters’ losses to Gibraltar.
The group acquired the nation’s largest online bookmaker, Sportingbet, and Waterhouse’s eponymous online wagering business, last year. Waterhouse was later appointed chief executive.
The financial statements for his company, William Hill Holdings Pty Ltd, show a loan of £334 million ($580 million) from a company in Gibraltar called Steeplechase. The hefty 5.79 per cent interest rate on this loan means $40 million of profits will go offshore, tax free, each year.
There is increasing concern in government and racing-industry circles over the small contribution made by corporate bookmakers in taxes and levies in Australia. News of this William Hill tax scheme is likely to bolster support for proper regulation of corporate gambling.
Already, gambling reform is back on the table in Canberra. A motion by National Party senator for Victoria, Bridget McKenzie, was carried at last weekend’s party conference for online gambling to be regulated by the Commonwealth.
Such a move would thwart the big corporate bookmakers – Ladbrokes, Paddy Power and William Hill – from “jurisdiction shopping” to find the best odds on tax and licensing.
Most corporate bookies are licensed in the Northern Territory where, on the most recent figures available, the entire sector paid just $2.3 million tax on turnover of $5.7 billion and profit of $469 million.
National regulation, if judiciously implemented, would prove a boon for taxpayers, the racing industry and the punters. The only losers would be foreign shareholders of the British betting houses that have expanded their interests dramatically here over the past three years.
Ironically, in pursuing its deregulation agenda, the Coalition did away with the National Gaming Regulator when it got to office. Now though, there is recognition that the damaging social effects of gambling and tax avoidance by the corporate players need to be addressed.
So it is that minister for Social Services Kevin Andrews will soon hand down a paper on gambling. Whatever his findings, there is pressure from his Coalition partners to move toward national regulation – as has been the case in Britain and the US.
Looking more closely at William Hill’s Gibraltar arrangements:
“Related party loans include £334 million in the consolidated group from Steeplechase Ltd, a company incorporated in Gibraltar which is repayable on 28 March, 2022. Interest is charged at 5.79 per cent per annum fixed for the duration of the loan,” says the relevant note to the accounts.
William Hill’s ultimate parent is William Hill PLC which, strangely, appears to have an exemption from reporting related-party transactions in its financial statements.
They do show, however, that the parent company issued £375 million in corporate bonds in June last year partly to fund the acquisition of Sportingbet. Those bonds are guaranteed by William Hill Organisation Limited – another subsidiary – and carry an interest rate of 4.25 per cent (due for redemption in June 2020).
The question then is why, in light of William Hill’s ability to borrow so much more cheaply, is the Australian entity borrowing so much money as such exorbitant rates from a company in Gibraltar? A spokesman declined to comment.
This is the official response to questions: “William Hill Australia does not discuss its trading policies. William Hill Australia complies with the regulatory requirements of the markets in which it operates.”
It is difficult to get a fix on this company’s financial position as the group has splashed $700 million buying the largest local operator Sportingbet (which had itself swallowed Centrebet) and then Tom Waterhouse last year.
Turnover from bookmaking was £1.17 billion last year which delivered revenue for William Hill Holdings of £89 million and a loss of £9.5 million. It paid no tax and derived an income-tax benefit of £2.6 million.
By far the biggest expense was the $26 million spent on marketing. The company bought Tom Waterhouse NT Pty Ltd in August last year for $35 million cash (the deal included an earn-out, that is a further $70 million contingent on earnings performance). The earn-out deal was settled early with $5 million being paid to Waterhouse.
Tom Waterhouse NT Pty Ltd does not appear to have lodged financial accounts since it incorporated. There was no response to questions about this.
The corporate bookmakers have also earned a poor reputation with punters in the past three years for refusing to accept bets from those who win too much or too often. Before the explosion in internet gambling, bookies at the track were beholden to accept bets. Finally, after the practice was sufficiently exposed there have been some changes to the wagering landscape. From last week, all bookies are required to accept bets on all NSW races from any customer. Not all bookies appear to have embraced the new regime in the same manner, however.
The William Hill entities have been offering two sets of odds on races: one at roughly similar prices to rival operators and another with lower odds for “marked” punters, or those who have a history of winning.
The spokesman for William Hill declined to respond to these claims and is believed to have been preparing to challenge the new regime legally.
“Now Sportingbet, Centrebet and Tom Waterhouse are quoting me under the odds, too,” a professional punter told Fairfax Media last week. “And they’re doing it to heaps of other people as well in total defiance of Racing NSW new laws.”
The issue is also a matter for vigorous debate on racing and punting blogs.
Moral of the story? If you are a customer in Victoria putting a bet on a race in NSW with a company from England which is registered in the Northern Territory – and may be sending a fraction of the money they just won from you to a company with undisclosed shareholders domiciled on a big rock in the Mediterranean – you might pause to consider … perhaps a national regulator might be a good idea after all.