While Sportsbet cajoles the government into weak policy on gambling ads, it is also betting big on tax-dodging and shonky accounting. Wally the Accountant investigates a GST scam.
Sportsbet is a multinational online gaming business that plays by its own rules – win-at-all-costs, whether it entails grooming children with gambling ads or grooming regulators and politicians to ignore its accounting and tax scams.
Something as simple as accounting for the goods and services tax (GST) in accordance with Australian Accounting Standards is not one of Sportsbet’s own rules. Compliance with the standards it seems is too much to ask of Sportsbet and its audit firm, KPMG.
Sportsbet has inflated its income, or revenue, by including GST collections. Overstating revenues by including the GST carries the aroma of accounting fraud.
Many people in Australia, and most definitely Sportsbet and KPMG, ought to know that the GST is a tax that is collected by businesses from customers for remittance to the Australian Taxation Office. GST does not, and has never had, the character of income or revenue of the business.
The GST included in Sportsbet’s revenue is significant. In its 2023 financial statements, Paddy Power Australia (the head company) disclosed net wagering revenue of $2.18 billion. One eleventh of this amount, around $198.5 million, is GST collected from customers on gambling. In its 2022 financial statements, Paddy Power Australia reported net wagering revenue of $2.24 billion including around $204 million of GST.
The Standards are clear
Paddy Power Australia and KPMG should make themselves familiar with two pronouncements that are freely available on the website of the Australian Accounting Standards Board (AASB).
The first pronouncement is Interpretation 1031 Accounting for the Goods and Services Tax (GST). Paragraphs 6-8 of this pronouncement make it crystal clear that GST must not be included in the recognition and measurement of revenue.
The second pronouncement is AASB 1048 Interpretation of Standards. Paragraph 8 of this pronouncement makes it crystal clear that Interpretation 1031 is mandatory for entities that prepare ‘general purpose’ financial statements under the Corporations Act, for example, Paddy Power Australia Pty Ltd.
Falsifying revenue by including GST is not Paddy Power Australia’s first ride at the shonky accounting rodeo, and it probably won’t be the last.
Maaate! Sportsbet pulls off the trifecta – duds politicians, punters, and the taxman too
Sportsbet’s big tax soufflé
As previously reported by Michael West Media, Paddy Power Australia created $1 billion of share capital in its 2020 financial statements by recognising a fantastical $1.1 billion of goodwill from the acquisition of BetEasy. This share capital fraud will allow Paddy Power Australia to avoid tax on future distributions made to its sole shareholder in the Netherlands.
The cash flow statement of Paddy Power Australia for 2023 points to a contempt for the Australian Accounting Standards Board. Cash flows from financing activities includes “Payment of Related Party Transactions” amounting to $184.9 million. This does not qualify as separate disclosure of cash flows arising from financing activities as required by paragraph 17 of AASB 107 Statement of Cash Flows. For what exactly is that cash payment?
The bad news is that ASIC is responsible for enforcing Australian Accounting Standards against multinational companies. In July 2024, a Parliamentary Committee released a report that describes ASIC as a regulator that has not just failed, but comprehensively failed.
ASIC has a long record of failing, of seeing nothing and doing nothing, when it comes to multinational financial statements. Its inactivity is a shame for the country because accounting fraud by multinationals facilities their tax fraud. Australia’s tax base is eroded, and this translates into fewer resources for schools, hospitals, roads and other infrastructure.
The huck of the Irish
Paddy Power Australia appears to be getting value for money from its auditor KPMG even if Australia isn’t. KPMG provided a clean audit opinion for their 2023 financial statements. They charged fees of $1.07 million for the audit and review of financial reports – an increase of $0.75 million over the $0.32 million charged for 2022.
Sportsbet is a poor corporate citizen. Socially responsible business practices are simply not part of the culture. This is precisely the sort of multinational enterprise that needs to be reined in by regulation and regulators instead of being mollycoddled by political negotiations with lobbyists.
Grooming
In June 2023, a Parliamentary Committee released a report into online gambling and gambling advertising entitled You win some, you lose more. This report includes three humdinger statements.
Firstly, gambling advertising [i.e. Sportsbet] is grooming children and young people to gamble.
Secondly, online gambling [i.e. Sportsbet] wreaks havoc in our communities, especially on our children, with its saturation advertising.
Thirdly, online gambling [i.e. Sportsbet) has a business model of encouraging harm by shunning gamblers who win and targeting gamblers who lose so that they will lose even more.
Twelve months after the report, or another year of grooming children later, the Albanese Government is still weighing up what to do about Sportsbet’s advertising.
The reasons for the delay are unclear. Is it Sportsbet’s political donations of $110 000 to the Australian Labor Party for 2022/23?
Is it because Sportsbet strokes the egos of our politicians and serves up great food and wine? Prime Minister Anthony Albanese attended a lavish meal paid for by Sportsbet before being elected. Communications Minister Michelle Rowland was wined and dined’ by Sportsbet on her birthday.
The ALP might be suckers for Sportsbet and its grifting ways but most Australians are not. So, Albo please protect Australian children from being groomed by Sporstbet’s advertising by introducing a complete ban on that advertising as soon as practicable. And Albo, please ensure Paddy Power Australia is not allowed to commit accounting fraud and is forced to comply with Australian Accounting Standards.
Murphy Report on gambling reform delayed by sports bet lobby
This post was originally published on Michael West.