Australia's Gambling Industries - Productivity Commission
Australia's Gambling Industries - Productivity Commission Australia's Gambling Industries - Productivity Commission
Bankruptcy How many gamblers have been made bankrupt by gambling? The National Gambling Survey indicated that 2900 people nationwide declare bankruptcy each year as a result of their gambling activities. However, as noted in chapter 7, the proportion affected is so small that the estimate is unreliable statistically. Official statistics on the causes of bankruptcy provide a lower number — some 317 bankruptcies a year attributed to ‘gambling and speculation’ in 1997-98 (appendix R). These figures need to be viewed with some caution as gambling and speculation which results in bankruptcy is an offence under bankruptcy law. Brading (1999) commented: Paragraph 271(a) provides that gambling or speculation up to 2 years before the presentation of the petition is an offence if it “materially contributed to, or increased the extent of, his insolvency.” .... Section 271 of the Bankruptcy Act has a surprising effect. It takes behaviour which is legal, namely “gambling” or “speculation” and retrospectively makes that behaviour into a crime. Gambling or speculation by a bankrupt only becomes a crime following bankruptcy if it can be proven that it was “rash and hazardous having regard to his financial position at the time and any other material circumstances.” While prosecutions are few in comparison with the numbers reporting gambling and speculation as the cause of their bankruptcy (see Brading 1999), it is likely that the possibility of prosecution results in significant under-reporting of gambling as a cause of bankruptcy. What is the cost of bankruptcy proceedings? Bankruptcy can basically occur in two ways: as the result of a creditors’ petition, or as the result of a petition by the debtor. The vast majority of bankruptcies (93 per cent in 1997-98) are the result of a debtor’s petition, lodged with the ITSA (Insolvency and Trustees Service Australia). A creditor’s petition involves the costs of court proceedings. The bankrupt’s estate will be managed by a trustee, which can be the ITSA. Some 95 per cent of bankruptcies in 1997-98 are managed by the Official Receiver, (Inspector General in Bankruptcy 1998). The ITSA’s fees are: … the whole of your bankruptcy estate up to $4,000. If your estate exceeds $4,000 the fees are $4000 plus a percentage on a sliding scale of moneys received in excess of $4,000. MEASURING COSTS J.11
This fee is only taken in estates where money is actually realised. All others are ‘free’ although there is a cost involved in terms of staff and administration. As most gambling related bankruptcies are ‘consumer bankruptcies’ it is likely that many do not attract a fee at all. In their estimate of the costs of gambling-related bankruptcies in NSW, Dickerson et al (1998) used a cost of $6,600 per court case. How has the cost of gambling-related bankruptcy been calculated? The key data used to estimate the cost of gambling related bankruptcy are: • the number of ‘gambling and speculation’ bankruptcies indicated by the official statistics (317); and • a cost per bankruptcy of $4000. While many bankruptcies will not involve this cost being borne by the person involved because insufficient money can be recovered, there is nonetheless a cost involved in the process and this should be considered in the estimates. The total cost of gambling related bankruptcies is estimated in this way to be $1.3 million each year. Bankruptcy involves a range of other costs, and having been declared a bankrupt may well reduce earning capacity, or borrowing capacity into the future. The Commission has not attempted to estimate such future costs associated with having been declared bankrupt as a result of gambling. Bad debts at bankruptcy The Commission’s surveys did not collect information on the level of bad debts at the time of bankruptcy. Nonetheless, it would be reasonable to expect the level of debt at bankruptcy to be at least as great as the average level of gambling-related debt at the time that problem gamblers seek treatment, and probably greater, as it is severe levels of debt that typically lead to bankruptcy. • Ladouceur (1994) reported that problem gamblers in Gamblers Anonymous in Canada had debts at bankruptcy ranging from $75 000 to $150 000 As with other debt, bad debts represent a transfer from others to the gambler, rather than a net cost to society. The fact that the gambler may not subsequently get ‘value for money’ when consuming gambling products is accounted for in the analysis in appendix C and chapter 5, where the benefit that consumers gain from access to gambling products in reviewed and quantified. J.12 GAMBLING
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This fee is only taken in estates where money is actually realised. All others are<br />
‘free’ although there is a cost involved in terms of staff and administration. As most<br />
gambling related bankruptcies are ‘consumer bankruptcies’ it is likely that many do<br />
not attract a fee at all.<br />
In their estimate of the costs of gambling-related bankruptcies in NSW, Dickerson et<br />
al (1998) used a cost of $6,600 per court case.<br />
How has the cost of gambling-related bankruptcy been calculated?<br />
The key data used to estimate the cost of gambling related bankruptcy are:<br />
• the number of ‘gambling and speculation’ bankruptcies indicated by the official<br />
statistics (317); and<br />
• a cost per bankruptcy of $4000. While many bankruptcies will not involve this<br />
cost being borne by the person involved because insufficient money can be<br />
recovered, there is nonetheless a cost involved in the process and this should be<br />
considered in the estimates.<br />
The total cost of gambling related bankruptcies is estimated in this way to be $1.3<br />
million each year.<br />
Bankruptcy involves a range of other costs, and having been declared a bankrupt<br />
may well reduce earning capacity, or borrowing capacity into the future. The<br />
<strong>Commission</strong> has not attempted to estimate such future costs associated with having<br />
been declared bankrupt as a result of gambling.<br />
Bad debts at bankruptcy<br />
The <strong>Commission</strong>’s surveys did not collect information on the level of bad debts at<br />
the time of bankruptcy. Nonetheless, it would be reasonable to expect the level of<br />
debt at bankruptcy to be at least as great as the average level of gambling-related<br />
debt at the time that problem gamblers seek treatment, and probably greater, as it is<br />
severe levels of debt that typically lead to bankruptcy.<br />
• Ladouceur (1994) reported that problem gamblers in Gamblers Anonymous in<br />
Canada had debts at bankruptcy ranging from $75 000 to $150 000<br />
As with other debt, bad debts represent a transfer from others to the gambler, rather<br />
than a net cost to society. The fact that the gambler may not subsequently get ‘value<br />
for money’ when consuming gambling products is accounted for in the analysis in<br />
appendix C and chapter 5, where the benefit that consumers gain from access to<br />
gambling products in reviewed and quantified.<br />
J.12 GAMBLING