The Productivity Commission's Draft Report on Gambling has opened up the potential for considerably more regulation of the industry. This is unusual because Productivity Commission reports invariably promote reduced levels of government oversight.
It is also regrettable because it injects the Commission into social policy for which it has few skills and sets it on a trawling expedition seeking spillovers to justify government intervention. The appointment of former ACOSS chief Robert Fitzgerald as a Commissioner also brought an amplified social perspective.
The Commission's findings include:
- a contradictory case that restrictions on competition not be introduced but that caps on the number of machines could be considered
- greater information be mandated at venues about the odds of winning or likely rate of loss
- restricting the availability of ATMs at gambling venues
- not reducing gambling taxes.
For many, the central finding stems from the Productivity Commission's economic analysis (some would say sophistry) that estimate a bottom line benefit to the economy from gambling of between $150 million and $5.2 billion annually. It may have expected the debate to be focussed on this benefit, and so it eventually might.
However, several of its key findings have set the regulatory train heading for the buffers at a speed that could take it off the rails or at least jolt its passengers. One of these was the estimate that 2.3 per cent of Australians are problem gamblers. This is a rather higher number than found elsewhere and the Commission magnifies it by saying that each one affects some 4-10 others. Suddenly "problem gambling" is an issue that mathematically could impact on 25 per cent of the population!
In addition, the Commission's surveys showed 75 per cent of the population thought gambling did more harm than good and a whopping 92 per cent wanted no further increase in gaming machines.
It's no wonder that the report should have politicians ducking for cover.
The Gambler as the Loser
Yet, wagering is an ancient activity. If there is more spending on it now, that reflects people's preferences on how they spend their own money, the free exercise of which is central to liberty.
Much of the Productivity Commission's report addresses the losses from gambling. It often seems to forget that gambling venues are places where people can meet to conduct the wager, often in the context of visual or contextual reinforcement of the satisfaction the activity brings. That context can range from the macabre, accompanied by Russian Roulette as depicted by the Deer Hunter in the dying days of the Vietnam War, through the glitz of a modern casino down to the homespun surrounds of a domestic living-room. And while Russian Roulette outrages the laws of civilisation, the venue's percentage (and the government tax take) is simply the amount that people will pay for the accoutrements.
These costs of the wagering institution are no more wasted than the high mark-up we pay for food in a fine restaurant rather than buying take-away.
Some of the Commission's Prescriptions
The Productivity Commission calls for venues to advertise the rate at which losses are statistically certain to occur. These might be legitimate but their rationale could equally apply to requiring other sellers to advertise their products' shortcomings. Thus, car retailers might be required to indicate to their customers the increased chances of accidental death through car travel rather than travel by rail or air.
The report counsels against tax reductions on gambling. It estimates the tax rate on gaming is on average 52 per cent and impacts most harshly on the poor. Even so, it opposes reducing the rate on the grounds that taxes on other goods (tobacco, alcohol) are also regressive. Aside from the 52 per cent being an understatement -- it excludes licence fees like the $597 million paid by Tabcorp and $376 million paid by Star City -- this sets an unfortunate precedent. In the past, the Commission has rejected arguments against reducing particular tax or tariff distortions because of distortions elsewhere. Were it to have done so, tariff reform may never have taken place.
The draft report will certainly have pleased two of the Productivity Commission's key constituents: the Treasurer and the Labor Party. A report hostile to an industry, that is seen to have Premier Kennett as its high priest would please the Treasurer whose brother will have coloured his personal views. As for the ALP, it might be deflected from its policy of abolishing a Commission that shows itself to be willing to graft social policies onto its "economic rationalism". But avoiding this kind of self-serving distortion is the reason why we have a Commission in the first place.
Even with this baggage, the Productivity Commission is institutionally unable to deliver a thoroughly bad report. Beneath the hyperbolic flim-flam of social distress caused by gambling, it does make a valiant attempt to demonstrate there are net gains. Moreover, it rejects limiting competition through provision of monopoly or more favourable taxation of clubs over pubs.
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