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Legislative Assembly for the ACT: 2000 Week 11 Hansard (30 November) . . Page.. 3497 ..

MR HUMPHRIES: This regulation provides for a credit up to the extent of the gambling tax liability for the GST already paid on their margins against their ACT tax liability. So a disallowance of this regulation would remove that mechanism. It would be grossly unfair to the operators themselves not to have some relief from one form of the tax or another, and it would also potentially place the ACT in contravention of the intergovernmental agreement on that new tax system.

The government acknowledges, of course, that in a worldwide competitive market the previous 50 per cent tax rate was not sustainable and was a significant impediment to potential applications. Many existing Internet gambling operators licensed overseas pay an annual licence fee of around $100,000 but do not pay any tax because there is little, if any, regulation of their operations in overseas countries.

However, regulation of Internet gaming appears to be gaining popularity. Antigua, the base of the majority of the world's unregulated gambling sites, has recently announced that it intends to introduce a regulatory regime and a tax rate of two per cent on gross profits. South Africa also has announced that it will impose a tax rate of two per cent on gross profits.

I would agree that the appropriate level of taxation at this stage of the development of interactive gambling is, to a degree, a matter of some uncertainty and will need to be monitored as the industry develops further. There is not sufficient historical data at this point to be fully confident about the turnover of potential operators and, hence, the most appropriate tax rates. Nevertheless, in considering tax rates offered elsewhere in Australia and worldwide, it is considered that a taxation rate greater than 20 per cent, inclusive of GST, would render the arrangements non-viable. A taxation rate of 20 per cent or less would at least give ACT licensed operators some chance to compete with other operators and maintain a viable business.

We have set up these arrangements, Mr Speaker. We are feeling our way with a new developing industry. How far the industry develops, I suppose, will depend to some extent on legislation being put through the federal parliament at the moment. But we have committed ourselves to a regime of regulating interactive gambling in the territory; and we have committed ourselves to be able to provide for a reasonable rate of taxation to ensure that that industry has a chance to operate as intended with the legislation we passed a couple of years ago. So I think it would be quite foolish to instate taxation levels which make those businesses now based in the ACT unviable and cause them to move out of the territory.

The tax rate proposed in the regulation is as follows: for each month from the beginning of a financial year until the total accumulated interactive gambling profit for the year exceeds $10 million, and includes the month in which the $10 million actually occurs, the rate is 20 per cent. If subsequently, and for each subsequent month of the financial year, more profit is incurred, then until the total interactive gambling profit for the year exceeds $20 million then a tax rate of 10 per cent applies. And then for each other month of the year a tax rate of five per cent applies.

Given the tax rates enjoyed, for example, in the Northern Territory at eight per cent and in Norfolk Island at four per cent, this proposal clearly gives the ACT a reasonable basis on which to proceed. It is actually not as low as those other jurisdictions, at least for the

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