The Tabcorp Holdings Ltd (ASX: TAH) share price fell 0.43% lower in yesterday's trade after the betting company provided an update on its ongoing Racing Queensland dispute.
What did Tabcorp say in its update?
Tabcorp reported that the Supreme Court of Queensland yesterday issued orders that caused a redacted version of its subsidiary's (UBET's) claim against Racing Queensland to be made public.
The claim relates to the extent to which the point of consumption tax (POCT) imposed on UBET is borne by UBET or Racing Queensland and impacts the calculations of fees under two contractual arrangements.
Agreement 1 relates to the Queensland Product and Program Deed between UBET and Racing Queensland (QPP) which sets out the long-term commercial relationship between the parties, including fees payable by UBET to Racing Queensland.
Agreement 2 is the Deed of Understanding between Tabcorp and Racing Queensland (DOU), which sets out minimum financial commitments to Racing Queensland regarding the UBET business and provides for annual top-up payments for the calendar years of 2018 to 2020 if UBET does not meet those minimum commitments.
According to yesterday's release, UBET believes that it is entitled to reduce or offset the fees paid to Racing Queensland by an amount that reflects 100% of the increase in wagering tax paid by UBET across racing and sport as a result of the introduction of the POCT.
Tabcorp said that it appears, based on the claim, that Racing Queensland agrees that UBET is entitled to make a reduction or offset, but only of a much smaller amount.
With regards to the DOU, Tabcorp understands that Racing Queensland's position is effectively that the top-up payment calculation requires any reduction or offset of fees under the QPP to be repaid to Racing Queensland.
Management said that if this is correct, UBET would bear the full wagering tax increase in the period from 2018 to 2020 while the company doesn't believe that the DOU requires any such repayment.
What about the Tabcorp share price?
While the Tabcorp share price closed 0.43% lower yesterday, clearly investors are still going to wait and see what the tangible impact of the case is on Tabcorp's earnings.
The case is ultimately between Tabcorp's subsidiary UBET and Racing Queensland, and looks as though there will still be quite some time before a final outcome is determined.
The Tabcorp share price has struggled to climb higher so far this year, gaining just 8.73% since the start of January to underperform the S&P/ASX 200 (INDEXASX: XJO) index by some margin.
