Crown Cooks Books to Avoid AU$200 Million in Taxes

The more that regulators dig into Crown Resorts, the more damming evidence they uncover. Now, it appears that the company circumvented paying their fair share of taxes to the Victorian government. According to reports, the company failed to pay AU$167 million in taxes, trying to write them off as winnings paid to customers.

Crown Admits to Gross Underpayment of Pokie Taxes

The Royal Commission in Victoria has uncovered yet more damming evidence against Crown Resorts. According to recent reports, it appears that the company has failed to make substantial tax payments related to pokie games. The company knows for a fact it has underpaid taxes totaling AU$167 million, but that number may be even higher.

#CrownMelbourne deducted AU$200 million in #casino #comps as #player #winnings to reduce #tax https://t.co/07g5mKcPMT

— House of Cards® (@HOCRadio) June 8, 2021

Mark Mackay from Crown Resorts reported on the matter to the Royal Commission. Mackay works for Crown as its Executive GM of Gaming Machines. He told the Royal Commission that he was instructed by Crown Melbourne CEO Xavier Walsh to create a spreadsheet to track tax underpayments for pokies.

Mackay determined that from 2014 to 2019, the company had failed to pay approximately AU$167 million in taxes for pokies. He further speculated that if 2020 and 2021 revenues are included, that number could be as high as AU$200 million.

Taxes Written Off as Winnings Paid to Customers

The tax shortfall being reported by Mackay is being claimed by Crown to be customer winnings from live pokies. However, further investigation makes it seem that the company is writing off expenses not normally tied to pokie games.

For example, the company wrote off various loyalty scheme promotions as part of winnings to players. They included the cost of free mails, accommodations, and other perks given to players as part of loyalty or VIP programs.

Crown’s CEO told the Royal Commission that the company fully believes that it can legally claim those deductions. However, Mackay was requested to create the spreadsheet because gaming tax legislation has a bit of ambiguity to its language.

Geoffrey Kozminsky has served as counsel for this inquiry. His report to the Royal Commission states that taxes are to be based on gross gambling revenue. This is the money received minus money paid out to players. This money is supposed to be in connection to money won playing pokies, not through VIP schemes or promotions.

More specifically, Crown had referred to the payments associated with loyalty programs as jackpot expenses. However, Kozminsky states that these fees do not classify as payments to players. If anything, these are more of an advertising expense.

Mackay admits that since he has been at Crown, the VIP scheme expenses were always referred to as jackpot expenses. He said that he is unsure whether that label is part of the company trying to conceal the funds. Mackay did agree with regulators that this practice was done to improve the company’s profitability.

Spreadsheet Has Not Been Turned Over to Royal Commission

What’s perhaps most damming about this situation is that the Royal Commission has been trying to get evidence of these numbers since February. The initial request came on February 26th. Later, the Royal Commission asked Crown directors to turn over any information regarding breaches of agreements with the government. However, the company has yet to turn over any data.

Crown Resorts is already in a world of trouble over its past interactions with gambling junkets and organized crime. However, this latest information shows that the deception goes even deeper. At this point, one can assume that the only way that Crown can get its license back is to sell off to another company. Even then, the new company will likely have to go under tremendous scrutiny for quite a while to reestablish government and customer trust in the casino.