Second blowout in a week: Government caught short $500m by gambling levy

IRD has put up its own costings for the Government’s plan to raise revenue from online gambling, which have come in vastly lower than what National envisaged prior to the election.

National planned to raise about $146m a year by closing tax loopholes enjoyed by online gambling, reckoning it could net $716m over the four-year forecast period from the policy change.

IRD is less optimistic. In a Regulatory Impact Statement on the change, which will require offshore gambling operators to pay gaming duty of 12 per cent on gross betting revenue, IRD reckoned the policy would net $35m a year, rising by 5 per cent a year, about $145m over the four year forecast period.

That means that over the four-year forecast period, the gap between National’s pre-election costing and IRD’s works out at more than $500m. It’s the second blowout the Government has had in a week, with news on Monday the Government’s reinstatement of interest deductability for landlords would come in $800m more than National costed at the election, mainly because of the cost of ramping up the policy during coalition talks with Act.

Finance Minister Nicola Willis conceded the figures were lower than National had estimated, but said that subsequent to the levy changes going to Cabinet, the Government is now looking at a new regulatory regime for online gambling, which would bring in $193m over the forecast period, closing the gap between what National forecast and what IRD had modelled.

“Cabinet has made a decision in principle to introduce a regulatory regime which we are advised by Treasury will lead to more revenue and that will be reflected in our forecasts at budget time,” Willis said.

National campaigned on regulating offshore online gambling better, bringing it into line with in-person gambling, which would have the effect of netting more tax.

The party campaigned on “establishing a regulatory regime for online casino gambling to ensure offshore operators pay their fair share” and “requiring online casino gambling operators to register and report their earnings for tax purposes, with IP ‘geoblocking’ of services that do not comply with the New Zealand licensing regime”.

The Regulatory Impact Statement for the policy looked at three ways of implementing this policy, by harmonising offshore online gambling rules with the rules of casinos, pokies, or introducing a flat 12 per cent duty, which was officials’ preferred option.

Willis said she was still happy with the scheme because online gambling was a “Wild West” that is “very unregulated and that in itself [is] problematic”.

She said she believed in the “principle” of fixing this.

“We also estimated that there could be significant revenue associated with such a change, we’re confident it will bring in revenue, it may not be as high as we estimated, however, work on the regulatory regime will continue in such a way that it supports this sector being fairly taxed,” she said.

Willis said that her preliminary forecast of $193m from the regulatory regime was “conservative” because once it was established, IRD would be better able to “go and explore [online gambling] as a source of further revenue”.

She also said that NZ First’s demand to beef up IRD’s audit capacity would have a positive revenue impact as the organisation would have better resources to chase down people who shirked on paying tax.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.