Crown’s potential state tax underpayment in the spotlight at royal commission

The Victorian royal commission into Crown Resorts has heard that Crown executive chairman Helen Coonan was aware that the casino giant could owe millions of dollars in unpaid tax to the state government.

The Australian Financial Review reports that in the wake of explosive revelations that Crown could owe up to $270 million in unpaid tax to the Victorian government, Ms Coonan confirmed she had heard about the tax bill for the first time on February 23, 2021, two days after the royal commission was called.

This had prompted her to direct Crown Melbourne chief executive Xavier Walsh to “give it to the lawyers for advice and disclosure to the commission.”

It was revealed in early June that Crown failed to disclose it had potentially underpaid the state government by claiming the perks it doled out to punters from its poker machine loyalty program as losses to reduce its tax bill.

This happened despite the commission specifically requesting the casino giant to point out any possible violations of Victoria’s Casino Management Agreement Act, which includes Crown’s tax obligations to date.

Counsel assisting the commission Geoffrey Kozminsky said at the time that there was no excuse for the failure.

Size of potential tax underpayment questioned by royal commission

Crown’s executive general manager of gaming machines, Mark Mackay, was recalled to give further evidence about his involvement in examining the size of the potential tax liability, which the inquiry heard could be $270 million, about $100 million more than previously thought.

The inquiry was told Mr Walsh said to Mr Mackay in a meeting on February 24 that Ms Coonan was “reviewing” the “latent issue” of possible tax underpayments, three days after the royal commission into Crown’s suitability to run its flagship Melbourne casino was announced.

“When Mr Walsh said there was a ‘latent’ issue, he meant ‘taxation’, which at that point had been concealed?” Mr Kozminsky asked.

“Yes,” Mr Mackay replied, but later clarified that the word “concealed” was not used.

“What aspects of the tax issue did Mr Walsh say Ms Coonan was reviewing?” Mr Kozminsky asked.

“If I recall correctly…I believe he had already spoken to Helen about the bonus jackpots and the concerns of them being deductions from gross gaming revenue. I can’t recall much more than those comments,” Mr Mackay answered.

Ms Coonan said in a statement: “On 23 February, 2021, Xavier Walsh raised with me a legacy issue of a potential problem with state casino tax.

“This was the first I had heard of it.

“I directed him to get the information together and give it to the lawyers for advice and disclosure to the commission.”

Mr Kozminsky quizzed Mr Mackay’s failure to recall Ms Coonan’s involvement during his first round of evidence in which the potential tax rort was revealed.

“It’s just extraordinary that if you’re being told about this tax issue, days after the commission’s been announced, knowing about the concealment, knowing about the concern, and knowing that the chairperson’s involved, it’s the sort of thing in the ordinary course that someone would remember, Don’t you agree with me?” Mr Kozminsky said.

“My evidence is I can’t recall it, so I can’t recall it,” Mr Mackay said.

Public hearings to end in July with final Crown report due on October 15

Crown faces an extra 11 weeks of heat from the royal commission after the first phase of public hearings led to an extension of time from the state government.

Victoria’s freedom of information chief, Sven Blummel, wrote in a submission to the inquiry that the state’s secrecy and confidentiality provisions that governed Crown and the regulator must be scrapped to improve accountability and transparency.

“As a result of these broadly defined terms, the secrecy provision prevents regulated persons from releasing to the public any and all information relating to the affairs of any and all persons involved in the gambling industry that fall within the ambit of government regulation,” he wrote.

“This includes all information relating to business entities, such as Crown Melbourne, irrespective of whether the information is innocuous, relates to the regulation of the business entity, or is in the public interest to disclose.”

Public hearings will end on July 9, with counsel assisting giving closing submissions almost two weeks later on July 19.

The final report is due on October 15.