The State Government's controversial deal with Crown Casino will add $41 million to the gaming venue's bottom line by 2015, according to a stockmarket analysis of the new arrangement.
A Deutsche Bank evaluation found that Crown will make more money from the deals 150 extra tables than it will lose from the State Government's tax increase.
After 2015, the deal will be worth an extra $10 million a year to Crown, the bank's analysts found.
Under the new arrangement — the biggest expansion of the casino in a decade — Crown's tax rate on its poker machines will lift from 21 per cent to 32 per cent in exchange for a boost to its gaming tables from 350 to 500.
Crown will also be able to double its poker tables within this limit and will no longer pay the $11 million-a-year levy that helped fund the state's health system.
The State Government wanted to change Crown's taxes following its reforms to the gaming industry, due in 2012. The deal, which locks in Crown's tax rates until 2022, was struck by Bruce Warner, a private negotiator hired by Treasury.
Mr Warner confirmed to The Sunday Age that billionaire Crown boss James Packer was present at several meetings during the 10-day negotiations earlier this year.
When the deal was announced last month, Gaming Minister Tony Robinson said that "Victorians would think this was a good deal" and Crown would think the deal was "less advantageous going forward".
But the Deutsche Bank report on the deal, by analysts Mark Wilson and Daniel Pi, describes the deal as a positive one for Crown, with an initial $10 million bottom-line loss in the financial years 2010 and 2011 changing to a $3 million net benefit in 2012, $19 million in 2013 and 2014 and a $10 million net benefit in 2015 and beyond.
The tax increase, the report said, "will be moderated by the roll-out of additional tables and the removal of the health benefit levy" (a tax on large gaming operators that helps fund the health system).
After claiming that the deal "virtually aligned" Crown's poker machine tax rates to those faced by its hotel competitors, the Government has now acknowledged that, after 2012, this will not be the case.
The machines in hotels most comparable to Crown's will be taxed at 50 and 58 per cent. In comparison, the casino's machines will face a 32 per cent tax on average monthly revenue. This means Crown gets a tax break on its poker machines of up to 80 per cent compared to its competitors after 2012.
Despite comments in Parliament last week about the deal aligning tax rates on poker machines, the State Government now says the deal is about aligning Crown's "overall tax rates" with its competitors.
Matt Nurse, a spokesman for the Treasurer John Lenders, said the Brumby Government has "effectively ended the tax break given to the casino, set up by the Kennett government, by virtually aligning the overall tax rates paid by the casino and the gaming operators".
Mr Nurse nominated another Crown tax, the super tax, as the reason the rates would be "virtually aligned". Under this tax, the casino must pay to the Government between 1 and 20 per cent on player losses of more than $880 million.
But Mr Nurse would not tell The Sunday Age how this tax may have changed under the deal or how much the Government collects under this tax. More details would be released, he said, when legislation came before Parliament.
Mr Lenders has said the Government stood to earn a $60 million tax windfall from the deal.
The deal has infuriated some of Crown's post-2012 competitors, the Australian Hotels Association and Clubs Victoria. "We would be delighted if the Government gave us the benefit it has given Crown — we would love to lock in our tax rate for 13 years," said the AHA's Victorian chief executive Brian Kearney.
Crown spokesman Gary O'Neill had no comment on the Deutsche Bank analysis. (Credit: The Age)
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