Chapter 11

Casino tax

Introduction

1. Crown Melbourne, as the casino operator, is obliged to pay a casino tax and other moneys to the State. The obligations are not imposed by the Casino Control Act.¹ Rather, they are found in the Management Agreement made between Crown Melbourne (then known as Crown Casino) and the State on 20 September 1993.²
2. The Management Agreement was ratified by the Parliament by passage of the Management Agreement Act. That Act provides that the Management Agreement ‘takes effect as if it had been enacted in [the] Act’.³ That is to say, the agreement has the force of a statutory enactment.
3. The Management Agreement has been amended by 10 Deeds of Variation. Each deed has also been ratified by an Act of Parliament.⁴
4. This chapter describes the amounts Crown Melbourne is required to pay to the State under the Management Agreement, with particular emphasis on the casino tax.

Casino tax

5. The Management Agreement in its original form provided that Crown Melbourne was to make the following payments to the State:
   • a Premium Payment ($10 million) and a further payment of $190 million, in consideration for the grant of the casino licence⁵
   • a Casino Supervision and Control Charge ($5 million) to be paid each financial year from 30 June 1994 until 30 June 1997, in respect of the regulator’s expenses of supervising the establishment of the temporary casino and the Melbourne Casino⁶
   • an additional casino tax of $2,400,000 each month from 1 July 1994 until 30 June 1996 (in aggregate $57,600,000)⁷
   • for each month until 30 June 1997, 20 per cent of the GGR for that month and from 1 July 1997, 21.25 per cent of the GGR for each month⁸
   • a community benefit levy of 1 per cent of the GGR each month⁹
   • an additional casino tax calculated by reference to the amount by which the GGR exceeds what is called the Base Amount.¹⁰
6. ‘Gross Gaming Revenue’ was defined as:

   the total of all sums, including cheques and other negotiable instruments whether collected or not, received in any period by the Company from the conduct or playing of games within the Temporary Casino or the Melbourne Casino (as the case may be) less the total of all sums paid out as winnings during that period in respect of such conduct or playing of games.¹¹

7. The payment obligations have changed over time. It is not necessary to describe each change. Reference will only be made to those changes that relate to Crown Melbourne’s obligation to pay casino tax.

Second Variation

8. The Management Agreement was varied by the Second Variation Deed made on 12 October 1995. This variation amended Crown Melbourne’s obligations in relation to the construction of the southern tower of the hotel that was originally required to be completed as part of the original Melbourne Casino Complex. The variation imposed an obligation on Crown Melbourne in respect of revenue from Commission Based Players.
9. A ‘Commission Based Player’ is a player who participates in a premium player arrangement or a junket.¹²
10. The variation also imposed obligations on Crown Melbourne:
    • to pay a casino tax of 9 per cent of the Commission Based Players’ Gaming Revenue (CBPGR) each month¹³
    • to pay a community benefit levy of 1 per cent of the CBPGR each month¹⁴
    • if the casino tax on the CBPGR and the community benefit levy for the year commencing on 1 January 1996, or the six-month period commencing on 1 January 1997, was less than $5 million, to pay an additional casino tax to bring the amount paid up to $5 million¹⁵
    • if the casino tax on the CBPGR and the community benefit levy for any financial year commencing on or after 1 July 1997 was less than $10 million, to pay an additional casino tax to bring the amount paid up to $10 million¹⁶
    • to pay an additional casino tax if the CBPGR exceeded the Commission Based Players’ Base Amount¹⁷
    • to pay as an additional tax a monthly guaranteed minimum base tax of $2.8 million from 1 January 1996 and ending 31 December 1998¹⁸
    • to pay $5 million to Tourism Victoria in five equal annual payments of $1,000,000.¹⁹
11. There was also an obligation to pay interest for any unpaid amounts under clause 22 (tax on GGR and other payments), clause 22A (tax on CBPGR) or clause 22B (guaranteed minimum base tax).²⁰ Interest is at the rate set under the Penalty Interest Rates Act 1983 (Vic).²¹
12. ‘Commission Based Players’ Gaming Revenue’ was defined as:

    the total of all sums, including cheques and other negotiable instruments whether collected or not, received in any period after 31 December 1995 by the Company from the conduct or playing of games within the Temporary Casino or the Melbourne Casino (as the case may be) by Commission Based Players less the total of all sums paid out as winnings during that period to Commission Based Players in respect of such conduct or playing games.²²

13. In addition, the definition of ‘Gross Gaming Revenue’ was varied by including the words ‘but excluding any Commission Based Players’ Gaming Revenue’ at the end of the definition.²³

Sixth Variation

14. In June 1999, the Commonwealth, States and Territories entered into the Intergovernmental Agreement on the Reform of Commonwealth–State Financial Relations. That agreement requires each State or Territory to adjust their gambling tax arrangements to take account of the GST on gambling operations.²⁴
15. The Intergovernmental Agreement was given effect by the Sixth Variation Deed to the Management Agreement made on 3 April 2000. By that variation, the total amount of casino tax payable under clauses 22 and 22A was reduced by the State Tax Credit, being an amount equivalent to the amount determined under division 126 of the GST legislation.²⁵

Ninth Variation

16. The Ninth Variation Deed was made on 4 June 2009. It made a number of changes to the rate of casino tax payable to the State:
    • The rate of casino tax payable from 1 July 1997 until the day before the commencement of the Ninth Variation Deed was set at 21.25 per cent of the GGR for the relevant month.²⁶
    • From the commencement of the Ninth Variation Deed the casino tax became:
      • 21.25 per cent of the GGR attributable to the operation of Table Games; plus
      • 22.97 per cent of the GGR attributable to the operation of gaming machines.²⁷
    • The casino tax on the GGR attributable to the operation of gaming machines was to increase by 1.72 per cent on 1 July 2010 and each year thereafter with the final increase to be in the year commencing 1 July 2014.²⁸

Tenth Variation

17. The Tenth Variation Deed was made on 3 September 2014. By that time Crown Casino had changed its name to Crown Melbourne Ltd and the VCGLR had become the casino regulator.
18. The Tenth Variation Deed led to several important changes. First, the deed recorded that the Casino Control Act would be amended to permit an increase in the maximum number of gaming machines (from 2,500 to 2,628) that could be located at the Melbourne Casino.²⁹ Second, it was agreed that the term of the casino licence would be extended by 17 years until 18 November 2050.³⁰ Third, it was noted that the casino licence would be amended to increase the maximum number of gaming tables for playing Table Games (from 400 to 440) and to increase the number of stations connected to FATGs (from 200 to 250) at the Melbourne Casino.³¹
19. In return, Crown Melbourne agreed to make the following further payments to the State:
    • $250 million within seven days³²
    • $250 million on 1 July 2033³³
    • if the annual growth of the Normalised Gaming Revenue for the financial year ending 30 June 2014 to the financial year ending 30 June 2022 exceeds 4 per cent, a payment of $100 million, on 1 September 2022³⁴
    • if the annual growth of the Normalised Gaming Revenue for the financial year ending 30 June 2014 to the financial year ending 30 June 2022 exceeds 4.7 per cent, an additional $100 million, on 1 September 2022³⁵
    • if the casino tax paid to the State in respect of GGR and CBPGR from New Gaming Product in any year from 1 July 2015 to 30 June 2021 is less than $35 million, an additional casino tax to bring the amount paid up to $35 million.³⁶
20. Three new definitions were introduced:

    Normalised Gaming Revenue means Gross Gaming Revenue, plus Normalised Revenue from Commission Based Play.³⁷
    
    Normalised Revenue from Commission Based Play means the total turnover from Commission Based Players, multiplied by 1.35%.³⁸
    
    New Gaming Product means the new gaming products permitted to be installed as a consequence of the amendments to the Casino Licence referred to in clause 2.2(b) of the Tenth Deed of Variation and does not include any gaming product installed at the Melbourne Casino as at the Tenth Variation Commencement Date.³⁹

21. There was also an obligation to pay interest for any unpaid amounts under clause 21A (the two payments of $250 million) and the casino tax payable under clause 21B (the uplifts if the rate of growth of the Normalised Gaming Revenue exceeded 4 per cent and 4.7 per cent, respectively, in the relevant years).⁴⁰ Interest is at the rate set under the Penalty Interest Rates Act.⁴¹

Conclusion

22. Crown Melbourne has acknowledged that since at least 2012 it has been underpaying casino tax owed to the State.
23. In July 2021, Crown Melbourne paid approximately $61.5 million to the State on account of unpaid casino tax (including penalty interest).⁴²
24. There is an unresolved question as to whether the underpayment of casino tax was far greater. The details of that issue are dealt with in the next chapter.