Winston Peters went to battle with Treasury for racing industry tax break

Winston Peters went to war with Treasury to secure the repeal of a tax on the racing industry.

Peters, the Racing Minister, was able to scrap the betting levy, a 4 per cent tax on betting profits as part of 2019's Wellbeing Budget.

Treasury pushed back firmly on the idea, saying it was concerned an analysis of the "wellbeing impacts" of scrapping the tax did not "acknowledge the potential for increased gambling harm if the racing industry grows and gambling winnings increase".

It was also concerned that getting rid of the tax would create "significant" cost and could lead to other taxes on the gambling industry being repealed. 

But it appears Treasury was overruled, with a paper noting Peters was "firm in his views on repealing the levy" and proposing a compromise, which was also rejected.

Peters announced the repeal of the levy in May when opening the New Zealand Bloodstock Karaka May Sale in Auckland. 

He said it would allow the industry to compete on a level playing field with countries like Australia. 

"For this reason the Government will repeal the current betting levy that is taken from racing and sporting gambling profits," Peters said. 

"By repealing the levy, this money will no longer flow to the Crown – it will instead be retained by the racing industry for the development of the racing industry," he said. 

Peters also said that part of the money that would be saved by axing the levy would be set aside for initiatives that would reduce harm from gambling.

Peters has a long history of opposing the levy.

In 2006, when Peters was Racing Minister under Helen Clark, he was able to negotiate a reduction in the levy from 20 per cent to just 4 per cent - again saying the reduction would revitalise the racing industry. 

Treasury advised the Government that the benefits of that earlier reduction were unclear, having not been "evaluated or outlined".

Every budget, Treasury produces screeds of documents analysing the financial implications of Ministers' bids for Government funding or tax cuts. 

This year those documents also included details about the wellbeing implications of ministers' policies, as part of the Government's shift towards Wellbeing Budgets.

It's not uncommon for Ministers to disagree with Treasury's advice if they themselves hold a strong view that a policy should go ahead.

It appears the main concerns with scrapping the levy were financial. In 2018, it netted $15 million of revenue for the Crown.

Scrapping the levy would work out to be a $60 million cost over four years, which is the standard amount of time Government budgets allocate funding for.

But there were concerns the cost would be much higher if other players in the gambling sector eye a repeal of taxes on their own businesses. 

Treasury feared similar taxes on gaming machines and casinos could also be repealed or reduced. 

The Government made $312 million from these taxes last year - repealing the taxes would cost $1.2 billion over the four-year period covered by the budget.

But Peters made his views clear to Treasury, which said that it "understood the Minister for Racing is firm in his views on repealing the levy".

It proposed a compromise: reducing, halving the tax from 4 per cent of gambling profits to just 2 per cent. 

But Peters rejected this as well.

The final policy is to phase out the tax entirely over the next three years. 

Peters was unavailable for comment.