The point of consumption tax is fomenting some discord in the Outback. Crown Resorts is fighting a planned 15% POCT for South Australia, Western Australia, and Queensland, which may go Australia-wide. The POCT would affect Crown’s fully owned subsidiary Betfair Australasia, among the smallest of Crown’s operations. It is fighting the tax by warning state governments that it will be forced to raise prices on consumers, which would cause leakage of customers to illegal betting sites, and there goes the state’s new delicious tax revenue.

There’s nothing wrong with fighting a new tax. In fact fighting any tax is a good thing. The way Crown is doing it though isn’t based on sound economics. Taxes cannot be simply pushed off onto consumers. Any company can always try to raise prices in order to increase revenues and margins, but it doesn’t always work. Just consider the extreme example and say the government raises taxes to a million dollars per online bet. In response, Crown will now charge a million dollars more in commission per bet. Obviously that wouldn’t work and Crown’s revenue from such a business would move to zero.

Even if tax costs could be shifted to consumers, that would mean consumers now have less money to spend on other things, maybe video games or some newfangled brand of transparent underwear. The shift would then be onto the video game sector or the see-through underwear company, who would then purchase less magical transparency salve from its own suppliers, and so on and so forth. The economy does not stop at any level. It keeps moving in a circle and a new tax affects everyone, in every industry, at every level, everywhere in the world.

Raising prices in an effort to cover a tax is not any different from simply raising prices in order to try to make more money just because. Consumers do not do the math in their heads as to how much of a given price is due to some tax or other. They just see the final price. They don’t consciously allow for a company to raise prices when a new tax is introduced and therefore pay more willingly because…you know…taxes and we consumers need to help. Indeed, if Crown tries to raise prices on its Betfair customers by 15%, those who cannot afford the price hike will move to cheaper venues as Crown says, hence leakage. That part is true.