Monday, August 08, 2022

NZ politicians to shake up racing, seek international interest

New Zealand’s racing industry is facing a major overhaul designed to bring in more international interest and boost revenue, though some critics say it increases political involvement in a traditionally neutral industry.

The recent national elections returned strident nationalist leader Winston Peters as Minister of Racing and Deputy Prime Minister in a coalition government. Peters leads the New Zealand First Party (NZF), which holds the balance of power in the New Zealand parliament following an inconclusive election in September.

He is said to be close to certain leading figures in racing who have strong views about the future direction of the industry and NZF’s policy is said to reflect the agenda of this group. He has now secured agreement for NZF’s racing policy to be adopted as government policy.

The ten-point plan includes promises to increase stakes at large race meetings, introduce a new category of meeting to attract more investors in horse ownership, to overhaul the tax treatment of horse ownership, and to review the operations of the New Zealand Racing Board, the statutory body which controls the racing industry (and covers thoroughbreds, harness racing and greyhounds.)

“Racing in New Zealand directly and indirectly accounts for well over $1.6 billion (US$1.1 billion) worth of GDP, employs tens of thousands of people, has the potential to rapidly expand its export earnings, and is an integral part of the Kiwi lifestyle,” Peters says on his party’s website.

The Racing Board owns the TAB, New Zealand’s only legal off-track betting system. Revenue from betting (after operating costs) is split among various parties: with shares going to the government through taxation and industry levies, to punters, and to the three racing codes for distribution to racing clubs.

Under the NZF policy “a greater proportion of industry taxation” will be returned to the racing codes, which is taken by industry observers to mean that the government will keep a smaller share.

Previously Peters used several million dollars of taxpayer funds to boost stakes to attract more overseas interest in the races, which worked “until the money ran out” as one industry observer put it. He is now promising to do that again, although no dollar amounts have been publicly mentioned so far.

Some parties in the racing industry argue that if the aim is to attract more domestic or international investment in the industry, stakes should be increased from the lowest levels first, starting with the maidens and progressively building to the bigger glamour races.

“Otherwise we’ll just get a repeat of the earlier situation”, according to one breeder who spoke to AGB. “Horses will come to New Zealand to race in the big money events, but there will be no more investment in studs or breeding stock than there is now.”

The policy also promises to “urgently review the operations and costs of the New Zealand Racing Board.”

The New Zealand Racing Board is currently upgrading its technology after having written off a previous $15 million upgrade which did not deliver the promised benefits.

Now Peters and his supporters seem set on cutting costs further, although others argue that the board needs to spend big on technology to stay competitive in the gaming and entertainment market.

However, there is a longstanding view held by some of the larger players in the industry that the NZRB’s costs are too high, and if lowered, this would lead to greater returns to racing clubs, and higher stakes for owners.

Four of the seven member board are appointed by the government, with one representative elected by the thoroughbred, harness and greyhounds sectors. A change of personnel to bring in new directors more aligned to the government’s policy is expected.

The NZF policy also promises changes to the tax treatment of investment in racing. At present purchasing horses for breeding or racing is treated as recreational spending for tax purposes and is not deductible. This is a longstanding issue, with breeders wanting the racing industry to be accorded the same tax treatment for bloodstock as given to other businesses.  

Arguably the different tax treatment deters investment because it is not treated as a proper industry even though New Zealand breeders have built a high international reputation for the quality of their bloodstock and regularly attract substantial numbers of international buyers to sales such as the annual yearling sales at Karaka, south of Auckland.

The issue is politically sensitive as it will be argued that a change in tax treatment of investment amounts to a subsidy or a form of corporate welfare.  

Currently the Racing Board operates a Racing Safety Development Fund which makes grants to clubs to improve safety features at grounds.

However most of the grants are made to smaller clubs which struggle to afford proper facilities (including maintaining public safety) so the scheme can be seen as a subsidy to clubs to help them avoid closure.

The NZF policy promises to “continue to support (such) projects and initiatives.” It will also introduce a new category of race meeting below the top level “where every race will have (prize money) of $15 000 (US$ 10 000) minimum.

The changes, if implemented as set out in the policy, would amount to a substantial shakeup of the industry, and a much larger level of political interference and control in an industry which has traditionally been self-governing and off limits to government.





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