NSW government reportedly in talks with Star on EGMs tax law

Star Entertainment has been grappling with the oncoming changes that are due to be introduced in New South Wales under the stewardship of the NSW Labor party, which won the March elections, and is now set to press on with what it sees as a tougher regime on electronic gaming machines (EGMs).

However, the initial zeal of the party to act as a hardliner has been lessened by the fact that the proposed law and increase of tax may have some unintended consequences that, although they appear to be tough on the industry, could end up backfiring.

This is why Star and the NSW government are now in discussions on how to address the situation moving forward, the Australia Financial Review reported citing sources and officials. The company has already had to undertake some cost-trimming, announcing in a filing to the Australian Stock Exchange that it is freezing the salaries of non-EBA employees, cancelling executive bonuses, and potentially letting go up to 500 full-time jobs.

The news definitely added to the feeling of doom compounding a looming tax decision on EGMs. Essentially, the new NSW Treasurer, Daniel Mookhey, will have to still roll in the new tax, but he will also have to navigate the subtle realities of how hard the tax can end up being, impacting jobs and shaking the overall sustainability of the business models used by Crown Resorts and Star Entertainment, the two companies that will be impacted by the new measure.

The tax is scheduled to take place in just a few days, with July 1, 2023, the date when it will be rolled in. The Australian Financial Review has offered insight into what is being discussed privately. Reportedly, Star Entertainment is not looking to have the tax scrapped, as the company has accepted that a more stringent regime on EGMs will be implemented.

Rather, the company and the government are discussing some possible approaches, one of which includes a deferral in when the law will be rolled out. The main issue with the law as announced by the former Treasurer, Matt Kean, is that the 60.67% tax that is now being proposed does not factor in some of the additional specifics of taxation and the casinos, to wit Crown and Star, way of operating in the state.

Because of the failure to recognize those realities, the actual tax paid by Crown and Star would be much higher and it would possibly have a bad impact on their operations, with the Star having to consider hundreds of layoffs. Mookhey seems to agree to an extent, arguing that the original policy as developed by his predecessor was not entirely feasible and even not properly developed.

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