Tabcorp Holdings (ASX: TAH) has announced that it has commenced court action against the Victorian Government regarding a levy slapped on it for operating gaming machines.
The issue surrounds the government charging Tabcorp the levy, known as the "Health Benefit Levy", for a full 12 months rather than on a pro-rate basis. Tabcorp's point of order is that it only operated gaming machines for 46 days (its gaming machines license expired on 15 August 2012), but is being charged for a full 365 days.
Yet this court case is loose change compared with the whopping Writ and Statement of Claim Tabcorp filed last year against the Victorian State Government for $686.8 million. This claim has its origins in the 1994 initial public offering of Tabcorp by the then-government which, according to Tabcorp, stated a payment due upon license renewals in 2012.
It's a fine line that Tabcorp has to walk. On the one hand, the company understandably wants to protect its rights, and test in a court of law dealings it believes to be unjust. On the other hand, as the company is regulated by the Victorian Government, it does require some careful moves.
Of course, it's a fine line which all gaming companies have to walk given their tight regulation by governments.
Lotteries and wagering provider Tatts Group (ASX: TTS) has to negotiate multiple licenses with a number of state bodies, while Echo Entertainment (ASX: EGP) owner of Sydney's Star Casino, needs to stay in the NSW Government's good books. Echo is currently locked in a high profile battle with billionaire James Packer and his casino business Crown Ltd (ASX: CWN), which is trying to muscle its way into the Sydney market.
Foolish takeaway
Gaming companies have defensive characteristics. In hard times it seems people still find the money for a punt and in good times they certainly enjoy a punt. This makes the earnings streams of most gaming stocks reliable — and they can also provide investors with maintainable dividends.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Tim McArthur does not own shares in any of the companies mentioned in this article.
