Wed, November 04, 2009
The Hong Kong Jockey Club (HKJC) doesn't just horse around. It plays an enormous role in Hong Kong's economy and is much more than a non-for-profit racing organization. The club, though not immune to the economic crisis, has fared well during the economic meltdown, a senior executive said in an interview with the Global Times.
HKJC, founded in 1884, is the single largest taxpayer in Hong Kong, thanks to its unique non-for-profit business model, said the executive, who requested anonymity.
"There are no shareholders in HKJC or bonuses distributed by the club," he said.
Economic backbone
In the fiscal year 2008/2009 ending June 30, of the HK$20.14 billion ($2.6 billion) in betting and lottery revenue, 64.4 percent was paid as betting duty and profits tax to the Hong Kong Special Administrative Region (HKSAR) government, according to HKJC's annual fiscal report. The approximately HK$12 billion ($1.55 billion) in duty and profits tax accounts for 10 percent of the fiscal revenue of the HKSAR Government, according to the executive.
The club helps stabilize Hong Kong's employment as well, the executive said. As one of the city's largest employers, it currently employs about 25,000 full-time and part-time workers and the part-timers account for about 11 percent of the part-time employees in Hong Kong. Every race day is prime time for the part timers as well as restaurants, bars, news stands, and taxis in the area as lots of people rush to the race track and off-track betting outlets of the club.
Challenges and opportunities
HKJC, like other commercial institutions, was not immune to the impact of the financial tsunami crisis, said the executive.
The club's surplus after taxes plunged from HK$3.27 billion ($421.96 million) in 2007/08 to HK$707 million last year, and the club only appropriated HK$500 million ($64.52 million) to The Hong Kong Jockey Club Charities Trust last year, compared with HK$1.78 billion ($229.69 million) in 2007/08, according to its fiscal report.
But the club has fared relatively well during the economic turmoil, as it made efforts to ensure its core business – horse racing. The HKSAR granted the club five extra race days and additional 15 overseas simulcast days per season, which will further expand HKJC's business, said the executive.
Even during the crisis, the club benefited from continued investment in horse racing venue facilities and related products. The Beijing 2008 Olympics and Paralympics attracted worldwide attention to the club's facilities owing to its HK$1.2 billion upgrade for the Olympic equestrian events, the executive said.
However there remain some limitations which hinder the club's growth, pointed out the executive.
There's an urgent need to review the current betting duty policy, the executive noted.
"The current rate of duty is between 72.5 percent and 75 percent of gross margin, which is one of the highest rates in the world, some three times that of Singapore (25 percent) and five times that of the UK (15 percent)," said the annual report.
The high duty rates are conducive to shore up the government's fiscal revenue, but restrain the club's ability to tap into rewarding long-term investments, the executive said.
Furthermore, its annual report stated that Hong Kong's "outdated tax policies" are still hampering horse racing's "further international development, especially in the area of commingling, a growing global trend in which Hong Kong is fast getting left at the starting gate. There is tremendous interest from overseas sports fans in betting on Hong Kong racing and this could earn substantial extra tax revenues for the Government." It said that current tax policies mean the wagers would be subject to the full rate of Hong Kong duty, in addition to being taxed in their home jurisdictions.
