What do racing and retail sales have in common? They share an issue that is important for New Zealand: both industries are suffering unfair competition from offshore websites.
Local retailers, online and physical stores, are at a disadvantage because offshore retailers do not have to charge GST. This gives them an immediate 15 per cent pricing edge.
In addition to the damage this causes local retailers, it negatively affects the Government's GST and income tax revenue, reduces our GDP and exacerbates our negative current account.
The situation is even more complicated when the goods are intangible, as opposed to clothing, books, electronics and the like. I'm talking about copyrighted music, software-as-a-service and financial products such as insurance, derivative securities, etc.
Who has jurisdiction over the "retailers" of such goods when the legal entities are domiciled in, say, the Cayman Islands and their servers sit in Russia or Romania?
All of these issues apply to sports betting, an industry of substantial economic importance to New Zealand.
When it comes to sports betting, the TAB has a statutory monopoly, which means it is illegal for offshore bookmakers to operate or advertise in New Zealand. Nonetheless, Kiwis can easily find offshore websites that enable them to gamble on events held in New Zealand. In fact they are doing this in droves. Why?
Offshore bookmakers do not pay the GST, betting duties, problem gambling levies and product fees that the TAB pays. This is a serious advantage that, simply put, enables them to offer better odds.
The New Zealand Racing Board estimates that betting with offshore bookmakers exceeds $300 million a year. While the loss of all these taxes, duties, levies and fees is unwelcome, the loss of product fees is particularly damaging for New Zealand sports.
TAB pays 1 per cent of its turnover and 5 per cent of its margin to the sporting organisations on which it takes bets, plus all residual profits go back into the racing industry. When punters bet with an offshore bookmaker, they erode the TAB's support for the very organisations on which they are betting. The Racing Board estimates that the estimated $300m in offshore bets equates to at least $30m a year in lost distributions to New Zealand's racing industry and national sporting organisations.
This is serious stuff. The racing industry helps support more than 52,000 Kiwis in breeding, training and racing thoroughbreds, harness horses and dogs.
Moreover, by supporting the breeding and training of horses and dogs, the racing industry contributes significantly to New Zealand's exports. For example, over the past 10 years in thoroughbreds alone, more than 44,000 foals were born in New Zealand and 17,000 horses were exported with an estimated value of $1.3 billion.
It won't completely solve the problem, but race-field legislation would go a long way towards levelling the playing field (pun intended).
Simply put, such legislation would compel offshore betting organisations that profit from New Zealand sports to pay a fair fee for the right to do so.