Rick wrote an open letter to the Herald Sun regarding the recent deal struck between Racing Victoria Ltd and Corporate Bookmakers. It was published on 28/11/08.

THE Victorian racing industry is facing a crisis.

How is it to be funded given the fact that we are facing severe shortfalls in revenue? How has all this come about and what is Racing Victoria Ltd doing to address it?

Ninety per cent of our revenue comes from the tote. Last year it was $225 million, with corporate bookmakers supplying $3 million. Yet roughly the same amount ($4 billion) is bet with corporate bookmakers as is bet with the tote. How then do we get the bookmakers to pay their fair share in funding the industry?

Last week RVL decided to meet the bookies' demands that they be taxed on their profit rather than their turnover.

A straight tax say of 1 1/2 per cent of turnover is easy to assess and therefore collect. A tax on profits is neither. Does the bookie, for instance, put in as profit the 5 per cent rebate he is getting when betting back on the totes?

Average profit for a bookie is 6 per cent of turnover. Thus a 1 per cent turnover tax would take about 17 per cent of his profit. A 10 per cent profit tax would end up being 10 per cent of 6 per cent, or just over half of 1 per cent. It leaves the industry with about one third of what it would have got from bookies had it taxed them on turnover, as is done in New South Wales and Queensland.

It was particularly galling to see bookmakers congratulating RVL on its decision to tax them on profits. It is going to cost us millions.

Tens of millions more will be put into bookies' pockets with the recent decision by RVL to allow them to bet tote odds, in effect usurping all the functions of the tote.

Punters will desert the tote in droves when offered a 5 per cent rebate on bets which bookies can do as, unlike the tote, they have virtually no overheads.

As a result, the money we get from the tote this year is likely to be down and even more so in 2010 and 2011.

It is estimated that for every $10 million in reduced tote turnover there will be an 8 per cent drop in prizemoney, if say $30 million, a 25 per cent drop.

Frightening, isn't it? Especially so when RVL told us six months ago that it would substantially cut the size of its bureaucracy and put money back into prizemoney, which had stagnated for five years.

We were told that on February 1, 2009, substantial increases to prizemoney would be announced. It will be interesting to see if RVL can deliver on this promise.

When RVL was established its charter was to represent the interests of all the people in racing. It has certainly looked after its own interests by developing a giant bureaucracy which has resulted in no across the board increases in prizemoney over the past five years.

And this is despite ever increasing returns from Tabcorp, including huge profits from poker machines -- $75 million last year.

It has also looked after the interests of bookmakers by allowing them to bet tote odds and pay the industry a pittance in return.

Racing Minister Rob Hulls has assured us that come 2012 when a new agreement is reached, racing will be no worse off.

That's three years away. What's going to happen in the meantime?

The tote is badly wounded and won't be able to fund the industry to the extent it has, and now bookies have been given the green light to usurp all its functions and are paying the industry a pittance in return. One wonders where it is all going to finish.