This represents a serious threat to the Jockey Club's financial fortunes and could result in a loss of revenue for the government, he told Radio Television Hong Kong in an interview.

Arculli also said that should the government agree to establish a tourist-only casino on Lantau, the Jockey Club should be allowed to run it to ensure that the gaming dollars and the profits remained in Hong Kong.

Arculli's claim was disputed by Deputy Secretary for Home Affairs Stephen Fisher, who said the drop in the club's turnover is not linked to Macau developments and that the decrease in racing revenue is being compensated by football betting income.

Arculli said he was delighted when the betting turnover for the Lunar New Year race meeting on February 11 reached HK$1.043 billion, the highest single-day turnover for the current season and HK$20 million up on last year's Lunar New Year take.

Attendance was also up from 74,322 last year to 76,030.

However, Arculli said the club's consultants had warned that, with Macau's gambling industry mushrooming, the turnover in Hong Kong could drop between HK$10 billion and HK$15 billion a year.

This was despite the recent cross-betting arrangement that allowed punters in the former Portuguese enclave to bet on Hong Kong races through Macau betting outlets.

Current figures indicate this to be around HK$20 million a meeting.

Arculli said that should the predicted drain of gambling dollars come about, the turnover from horse racing for the current season could drop between
10 percent and 20 percent over last year's total of HK$65 billion.

Macau had earlier estimated that the net profit from its gambling industry could reach US$5 billion (HK$39 billion) a year.

``Some other places such as Singapore and Thailand are also establishing casinos and developing their gambling industries,'' Arculli said. ``Some of them are also decreasing their betting tax.''

``We have been passing on this information to the government during discussions on our call for a change in the way horse racing is taxed.''

Arculli said tycoons in Macau have been stepping up their efforts to attract gamblers from Hong Kong.

And at least nine cruise ships catering to gamblers leave Hong Kong shores each day.

Arculli said that in an attempt to offset this drain on gaming dollars, the club would cooperate with travel agencies and Hong Kong Tourism Board to attract more mainland visitors to its two racecourses.

The club's annual turnover for horse racing peaked at HK$92.3 billion in 1997.

There were small but steady declines for the next two years before a slight rise in 2000-2001 when the club increased the number of race meetings a year from 75 to 78. It has been downhill since then, reaching HK$65 billion at the end of the last racing season in June.

Arculli said the club's discussions with the government on its proposal to change the way racing is taxed were making only ``a little progress.''

The government currently takes 12percent off standard win, place and quinella bets and 20 percent on exotic and multiple bets.

The Jockey Club wants the government to switch from a tax on bets to a tax on gross profits, as is now the case with football betting.

Arculli said that in addition to trying to convince the government, the club feared that lawmakers did not fully realize the importance of reforming the betting tax system.

He said it is not pushing for a change in the system to increase betting revenue but to help the government secure a stable income in addition to enabling the club to donate HK$1 billion each year to charity.

According to sources, one of the reasons why negotiations with the government are dragging is because Financial Secretary Henry Tang does not want to become personally involved.

Tang is a long-time member of the club as well as a horse owner and fears he could be accused of a conflict of interest should the club be seen to be getting special privileges.

Arculli said he personally feels that a casino on Lantau is not a good way to raise additional revenue for the government.

However, since it could help attract tourists and develop Hong Kong's financial market, the Jockey Club should be granted rights to operate it.

``We are a non-profit making organization. This ensures that profits generated from the casino will go to the government and to charity organizations,'' he said.

Fisher rejected Arculli's claim that the decrease in betting turnover was caused by Macau's gambling industry.

He said the drop in turnover was due to the fact that youngsters were not interested in horse racing.

He also believed that income from football betting could offset the loss in horse racing.

teddy.ng@globalchina.com