The Hong Kong Jockey Club has warned of offshore and unlicensed rivals swooping in on business and irreversible damage to competitiveness after the city’s finance chief called for an annual HK$2.4 billion (US$306 million) special football betting duty over the next five years.

According to Financial Secretary Paul Chan Mo-po, the proposal featured in Wednesday’s budget address took into consideration external competition and that existing betting duty rates remained unchanged.

A government insider said Chan was seeking to table an amendment to the Betting Duty Ordinance in the next several months, adding authorities had asked the racing club not to downsize its charity projects as a condition for renewing its licence.

The city’s sole gambling operator said it would pay out an extra HK$12 billion in betting duty over the proposed period, despite making substantial donations to support the community on a regular basis.

“Any permanent hike in betting duty rates will create structural problems, irreversibly damaging the club’s successful integrated model and continued competitiveness while benefiting only illegal and offshore betting operators,” the club wrote in a statement.

The gambling operator also warned the potential extra duty would adversely affect its ability to donate to the community, but vowed not to cut its regular contributions.

The club during the 2021-22 financial year forked out HK$2.1 billion to support pandemic-related initiatives, as well as community activities marking the 25th anniversary of the city’s return to mainland Chinese rule.

The organisation’s total donations to the community that year stood at HK$4.5 billion.

The club also appealed to the authorities to review football betting licensing conditions to give it more flexibility to respond to competition from illegal and offshore gambling operators, as well as to reduce the impact of the proposed levy.

Responding to the club’s concerns, Chan said: “They need to figure out themselves how to absorb the additional duty of HK$2.4 billion, whether by cutting costs or tapping into their reserves. They can afford it.”

The duty increase was previously floated by the New People’s Party in January, but the club hit back at the suggestion and accused the political group of a failure to understand how the business functioned.

Regina Ip Lau Suk-yee, Executive Council convenor and the party’s chairwoman, argued the operator needed to devise fresh incentives targeting punters and enhance its competitiveness.

“[The special duty] only affects the Jockey Club, it does not affect the punters at all. This is the sort of form of tax governments normally resort to when they are short of money,” she told the Post.

The government’s deficit is set to increase 40 per cent from HK$139.8 billion expected for 2022-23 before falling to HK$54.4 billion in the next financial year.

Allan Zeman, a non-executive chairman at hotel and casino resort Wynn Macau, said he did not expect the special duty would affect the club “to any great extent”, as they could be “more creative” when it came to securing money.

Simon Lee Siu-po, co-director of the international business and Chinese enterprise programme at Chinese University, characterised the special levy as a scapegoat to distract from the government’s lack of long-term financial planning after it increased spending during the coronavirus pandemic and later reported a deficit.

“The financial secretary used the five-year time frame to make the budget look better at the expense of the Jockey Club and public betting,” Lee said.

Chan, however, said the government had refrained from raising income and profit taxes to avoid placing additional strain on residents and small-and-medium-sized enterprises during the economic downturn.

Lawmaker Doreen Kong Yuk-foon said the government’s decision to collect HK$2.4 billion from the club was unfair and highlighted the bookmaker’s role as a benefactor of city NGOs.

“This budget hasn’t been very helpful for the grass roots community in the city, meaning they would have to rely on non-profit organisations or charitable organisations like the Hong Kong Jockey Club going forward,” she said.

“We can see that the Hong Kong Jockey Club has increased its charity expenditure over the past three years, and if we increase the betting tax, it seems like [the government] is biting the hand that feeds it.”

During the financial year ending on June 30, 2022, the club raked in earnings of HK$19.7 billion from football bets on top of HK$19.4 billion in earnings from horse racing.

Hong Kong allows limited and regulated forms of betting, although it is not government policy to encourage gambling.

The club is the only licensed gambling operator in the city and pays a betting duty to the government, giving it a monopoly that covers horse racing, football and the city’s lottery.

Duty for betting on racing and football matches is charged based on net stake receipts under the present system.

The duty rates for stakes on racing are from 72.5 per cent to 75 per cent on a progressive basis and 50 per cent for football matches.

The charge under the lottery betting duty is based on 25 per cent of the total proceeds.