05/08/2003 11:00PM

First step to eliminating foreign tax


NEW YORK - A bipartisan budget bill that was passed out of the United States Senate Finance Committee on Thursday night includes language that would eliminate a tax on foreign wagers that has prevented Canada and other foreign countries from commingling bets into American pools.

The bill, which includes a tax-cut plan supported by President Bush and Senate Republicans, is expected to receive support from the House and Senate. The horse-racing language was inserted by Kentucky Sen. Jim Bunning, a member of the Finance Committee.

Racing lobbyists have been attempting to attach the language to a viable bill for three years, but those efforts had been unsuccessful. On Friday, lobbyists said they were guardedly optimistic that the language would survive the legislative process.

"It's clearly the most progress we've had to date," said Greg Avioli, the deputy commissioner of the National Thoroughbred Racing Association, who has spearheaded the lobbying effort. "Now we just have to hope that we can keep it going."

The bill would need to be passed in the Senate and then reconciled with a separate House bill in conference committee. The House bill does not include the racing language.

Many U.S. tracks are hoping that the elimination of the tax will allow them to aggressively seek business from overseas bettors, especially those in Central America, South America, and Europe. More immediately, the language would allow Canadian bettors to wager directly into U.S. commingled pools.

Several countries - such as France, England, and Ireland - already have treaties with the U.S. that nullifies the tax. But for countries that don't, the tax subjects any winning bet to an automatic 30 percent withholding.

To avoid the tax, Canadian tracks create separate pools on U.S. races, calculating payoffs independently of U.S. betting. The separate-pool policy has been blamed for limiting the growth of simulcasting on U.S. races in Canada.

Breeders' Cup, which merged with the NTRA in 2001, has been one of the most aggressive racing companies to seek foreign bets, and in the past it has accepted commingled wagers from four countries with tax treaties with the U.S. Ken Kirchner, the head of Breeders' Cup's simulcasting operations, said he was hopeful that the Breeders' Cup would be able to expand even further into Europe and establish beachheads in Central and South America this year if the racing language was approved.

Avioli warned, however, that many large racing countries still have protectionist policies in place that prevent their citizens from betting on foreign races in commingled pools. Those countries include Hong Kong, Japan, Australia, and New Zealand, four places where horseracing is immensely popular.

"In a way, this is really the first step," Avioli said. "Now we have to go on all these trade missions to say, 'Our guys can bet on your races, so why can't yours bet on ours? All we want is a level playing field.' "