Elimination of Withholding Tax Becomes Law

The Foreign Sales Corporation bill, which includes a provision to strike the 30% withholding tax charged to foreigners for winnings on United States races, was signed into law Oct. 22 by President Bush.

The National Thoroughbred Racing Association has made elimination of the tax a priority given the potential for growth in the international simulcast marketplace. The tax greatly limited the export of U.S. signals to foreign countries.

The main purpose of the FSC bill is to repeal subsidies for U.S. exports that the World Trade Organization has deemed illegal. 

"What this does is open up the U.S. market to other countries able to take U.S. signals," said NTRA deputy commissioner Greg Avioli, the organization's point man in Washington, D.C.

The NTRA expects elimination of the tax to open up what it believes is an $85-billion international wagering market. If only 5% of that amount were to enter U.S. pools, about $4.25 billion in handle and $135 million in commissions would be generated.

Avioli said the NTRA would now work with Robert Zellick, the U.S. trade representative, to get horse racing recognized as a domestic exporter. He said the industry also would continue working to upgrade tote systems to facilitate international simulcasts.

For the Oct. 30 Breeders' Cup World Thoroughbred Championships, common-pool wagering will be offered in Australia, Austria, France, Germany, Great Britain, Ireland, Panama, Peru, South Africa, and Switzerland. More than 10 other countries, including Canada, will offer separate-pool betting.

Ken Kirchner, senior vice president of product development for the NTRA, said Canadian common pools would have to wait for next year. "There are some regulatory and tote issues that are just too much to overcome in that short time frame," he said.

Canada wagers about $600 million a year on U.S. races through separate pools. Common pools, Kirchner said, would allow the country to offer wagers such as the pick six.

The FSC bill also contains provisions to eliminate a series of tariffs on a variety of exports to the European Union, including horses. The tariffs began in March at 5% and have increased 1% each month since.