Racing enjoys special treatment under NZ gambling laws. Why?

Despite the harm it is known to cause to a significant number of New Zealanders, the gambling industry as a whole is commonly defended for its contribution back to the community.

Lotto NZ, for example, must redistribute all profits from Lotto in this way. Other forms of gambling are taxed or regulated differently, but most pay back a share of their profits in some form.

Critics counter that such redistribution of gambling revenue does not fully address the harmful effects of problem gambling, or the fact that gambling itself isn’t distributed evenly across society.

So, while 63% of electronic gambling machines – colloquially known as “pokies” – are located in areas of relatively high deprivation, just 12% of the proceeds from those machines go to those areas.

But the racing industry is permitted to return almost all its profits back to the industry itself. In fact, the sector – covering horse racing and, until recently, greyhound racing – benefits from unique treatment.

Largely self-regulating

The Gambling Act 2003 requires some minimum percentage of gambling proceeds to be returned to community organisations or other “authorised purposes”.

But it also states that one of those “authorised purposes” is “promoting, controlling, and conducting race meetings under the Racing Industry Act 2020, including the payment of stakes”.

The racing industry is the only sector with a specific provision in the act allowing it to return gambling proceeds to its own industry. This extends to most profits from electronic gaming machines located in TAB premises.

Of all the forms of gambling, electronic gaming machines are generally recognised as generating the most harm.

In 2025, the TAB’s monopoly on domestic, in-person betting on racing and sports was extended to cover online betting. This was intended to “maximise the financial returns to New Zealand’s racing industry and sports”.

Typically, industries that cause harm are regulated in an attempt to minimise that harm. But the racing sector, via the TAB, is now largely self-regulating.

Although a Racing Integrity Board regulates issues such as animal welfare, recent changes to the Racing Industry Act empowered horse and greyhound racers “to effectively govern their respective industries” and is “intended to provide the industry with independence from the Government”.

Tax and levy exemptions

The racing industry also does not pay income tax. Like other gambling entities, it does pay a problem gambling levy – in its case, 0.74% of betting profits or 1.24% of profits from gaming machines located in TAB outlets.

Other gaming attracts additional levies: Lotto faces a 5.5% lotteries duty, casino operators pay a duty worth 4% of casino wins, and the levy on gaming machine profits is 20% (also paid by the TAB on machines in TAB premises).

But the racing sector no longer has to pay such additional levies on racing. Until recently, a 4% “totalisator duty” was payable on all racing and sports betting, but this was repealed progressively to reach zero in 2021.

The savings to the two betting categories from repealing the duty was NZ$14.5 million in 2024, of which $11.5 million went to racing.

This saving for the industry is, of course, a direct cost to the Crown in the form of foregone tax revenues.

The justification for the repeal was to help the racing industry become more financially self-sufficient. But levies and taxes are usually based on the nature of an activity – in particular, the harms it causes – and not the level of profit (or loss) it makes.

Under the Racing Industry (Distribution from Betting Profits) Regulations 2021, the TAB must retain just 2.5% of betting profits for harm prevention and minimisation.

The remainder is distributed to Racing New Zealand and Sports and Recreation New Zealand, in proportion to the revenues generated by racing or sports betting.

In practice, this means most distributions accrue to the racing sector. For example, total distributions of racing and sports betting profits in 2024 were around $199 million, of which $195 million (98%) went to racing and $3.5 million (2%) went to community sports organisations.

Time for a rethink of the rules

For decades, ministers of racing have gone to great lengths to protect the industry. In the runup to the TAB getting its monopoly over online betting in 2025, official documents noted that “Ministerial expectations” were one of the reasons the changes must be “implemented as quickly as possible”.

Government support for the racing sector is often justified by claims of improved employment opportunities, benefits to provincial communities and increases in the industry’s overall economic contribution.

But these arguments could be made for most industries in New Zealand – industries that do not generate the harms gambling does. State support for the racing sector generally means there will be more gambling on racing. That in turn implies increased harm from gambling.

We argue it’s time for a wholesale review of the tax and regulatory privileges that have accrued to this industry without any convincing rationale.

Lisa Marriott receives funding from the Gama Foundation Fund.

Max Rashbrooke receives funding from the Gama Foundation Fund.