Sunday September 3, 2011 : Reluctant possibility driven by unyielding Government taxation rate
 
The Hong Kong Jockey Club's strategy to partake in overseas betting pools is being severely restricted by its Governments taxation rate, pushing the company into reluctantly considering, as a last resort, setting up offshore commingling separate from its local operations, according to a report in the South China Morning Post.
 
Commingling is the practice where bets placed with foreign operators' are channelled into a "home" pool where the race is physically run.  Both operators share a percentage of the bets earnings and each complies with its own Government's requirements.
 
Legal betting on Hong Kong racing is active in a number of foreign countries but the bets are channelled into small local pools of which the Jockey Club receives a three percent cut.  The Club believes that a more stable home pool would double the take from the small pools to between HK$6 billion to HK$8 billion per annum but the Government is unprepared to compromise on its tax cut, making the process commercially unviable.
 
Winifried Engelbrecht-Bresges, chief executive of The Hong Kong Jockey Club said: ""We don't have any plan to go offshore at this stage, but it is something we would have to consider if we do not get action soon.
 
"We have huge illegal exchanges operating just outside our door, and with other countries banding together in a commingling hub to take legal bets between different nations, the external forces on all sides are building up and we are going to be shut out. We don't live in a vacuum – ultimately, these operations can endanger our business right here."
 
The Government's stance is surprising considering that The Jockey Club estimates that an additional HK$180 million would make its way into the Government's coffers should the practice become commercially viable.
 
 "Amazingly, the end beneficiary of commingling would be the government, which is providing the obstacles," Engelbrecht-Bresges said. "In our increased simulcasting of overseas races, for example, the government, and therefore the community, has benefited by more than HK$150 million, the Jockey Club by around HK$10 million after we have paid all the expenses involved."