Why is the Tabcorp share price racing higher today?

Tabcorp shares have started the week strongly…

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Key points

  • Tabcorp shares are racing higher on Monday
  • This morning the gambling company settled its legal proceedings with Racing Queensland
  • The Queensland Government has announced legislative reforms that will be a big boost to Tabcorp's business

The best performer on the ASX 200 on Monday has been the Tabcorp Holdings Limited (ASX: TAH) share price.

In afternoon trade, the gambling company’s shares are up 5% to 98.5 cents.

This compares favourably to a 0.4% decline by the ASX 200 index.

Why is the Tabcorp share price charging higher?

Investors have been bidding the Tabcorp share price higher today following the release of an announcement.

In 2019, the racing body commenced legal proceedings against Tabcorp in relation to disputes concerning the calculation of fees payable by Tabcorp following the introduction of point of consumption tax (POCT) in Queensland in 2018.

According to today’s release, Tabcorp and Racing Queensland have entered into an agreement to settle the legal proceedings. This agreement will see Tabcorp pay Racing Queensland and the Queensland Government a combined total amount of $150 million (excluding GST).

Tabcorp has prepared for this by previously disclosing a contingent liability of $75 million post tax and $108 million pre-tax.

Queensland wagering industry reforms

The aforementioned settlement remains conditional upon the commencement of legislation that will implement proposed reforms by the Queensland Government.

These proposed reforms relate to the wagering taxation and racing industry funding model and include an increase to the POCT rate to 20%, payable by wagering operators.

Upon these reforms taking effect, key industry agreements with Racing Queensland will terminate, resulting in a level playing field and Tabcorp paying wagering taxes and racing product fees on the same basis as other wagering operators.

This is a bigger positive for the company than it might first seem and explains why the Tabcorp share price is charging higher today.

Tabcorp’s Managing Director and CEO, Adam Rytenskild, was very pleased with the news. He explained:

Online betting has changed the market substantially since TAB’s licences were issued. On a relative basis, TAB currently pays double the fees to the local racing industries compared to other wagering operators. Going forward we will all pay the same in Queensland. I commend the Queensland Government for delivering fair and much needed reforms that bring the wagering market into line with the modern economy.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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