SkyCity will pay around $40m ''tax" on its pending online gambling service - whether a government irked by its offshoring plan wants it or not.

The casino operator's chief executive, Graeme Stephens first discussed broad plans for online gaming in August last year.

Today, spokesman Colin Espiner said a SkyCity online casino would launch by the end of this year.

A location has yet to be set, but Espiner said it could not be New Zealand or Australia, given online gambling was illegal in those countries and that somewhere in Europe was a "fair summisation, given that's where most online gaming is based."


Espiner says while SkyCity will be prohibited from adverting its offshore-based online casino to New Zealanders, there will be some search engine optimisation done to attract international punters. Kiwis could also hear about it through world-of-mouth or the media.

Internal Affairs Minister Tracey Martin is reported saying she is "disappointed they are forging ahead," but Espiner maintains his company's online move will be a positive for the government.

The SkyCity comms boss says although his company's offshore-hosted website will be beyond NZ jurisdiction, his company will self-regulate, based on the host responsibility measures it has in place in its real-world casinos.

Playing will be closely monitored for unusual patterns, Espiner says, and problem gamblers will be kept in check with time and spending limits.

Espiner also says he hopes a white paper Martin is due to deliver to cabinet later this year will recommend online gaming services based in NZ. Thousands of Kiwis already use hundreds of gaming sites offshore, the says, with no checks or balances or tax revenue. Legal, locally-hosted services could be regulated, and taxed.

On the tax question, Espiner says it is still unclear if SkyCity will be able to pay GST on revenue generated by its offshore, online casino - which will likely be run by a subsidiary company that partners with an established digital gambling firm.

However, Espiner says even if it ultimately proves that the government can't accept the $30m to $40m in GST that SkyCity estimates its online casino will generate annually, the company will give the same sum to its Community Trusts programme.

He says Sky anticipates slim-to-no profits from the online casino in its first year, due to high setup costs, but that if it does get into the black then it will repatriate those profits and pay on tax on them.


The TAB and Lotteries Commission are also bleeding revenue to offshore online competition, Espiner claims. While the Problem Gambling Foundation has opposed moves to liberalise NZ law around online gambling, the SkyCity man argues it would shift activity back to a regulated environment.

Espiner says while SkyCity could establish an online casino offshore without consulting Martin or the DIA, it has chosen to keep both in the loop. "We don't want any surprises."

Rarking up the minister

While SkyCity hopes Martin's paper to cabinet will recommend online gaming, it's also possible that's its move to establish an offshore online casino will rile the minister, or that she will otherwise say NZ should follow Australia's move to clamp down on locals accessing offshore gambling sites.

Espiner says it would be wrong to follow Australia and block access to offshore gambling sites. He argues that many people use VPN (virtual private network) software to mask their location and get around the ban. He maintains it also raises free speech issues.

Even if Sky gets has its druthers and online gaming is made legal here, could some punters still prefer one of the hundreds of offshore sites that put no restrictions on spending or time?

"We hope we can become the market leader because we're a trusted brand," Espiner says.


"People would rather give their credit card details to us rather than someone they've never heard of in Jersey."

SkyCity shares closed Friday down 1.57 per cent to $3.77.

The stock is down 6.0 per cent for the year.

Forsyth Barr rates it neutral, with a 12-month target price of $3.88.

ForBarr analyst Chelsea Leadbetter says a share buy-back programme and solid dividends are positives for investors, but notes the company is "playing catchup on IT expenditure", and has concerns "about the ability to grow local gaming longer-term in Australasia without significant capex programmes."