Irish Government Doubles Betting Tax Threatening Independent Bookmakers with Extinction
Posted on: October 10, 2018, 11:00h.
Last updated on: October 10, 2018, 11:52h.
The Irish government has doubled tax rates on betting as part of its 2019 budget, as it had threatened to last week.
Shares in Paddy Power Betfair fell five percent on the London Stock Exchange (LSE) in the immediate aftermath of finance minister Paschal Donohoe’s budget announcement on Tuesday, wiping £250 million ($329 million) off the company’s market capitalization in just over two hours.
Two percent may not sound so brutal, but this is not a tax on bookies’ win (gross gaming revenue) as commonly found in other jurisdictions, but on handle — ie, the total of the volume of bets before winnings are paid out to bettors. Bookies generally keep around 6 to 8 percent of handle as gross-gaming revenue before they pay all their other expenses.
As the biggest bookmaker in Ireland, Paddy Power is most exposed to the new tax hit. The company said the government’s decision will increase its annual tax bill in Ireland by an estimated £20 million ($26 million).
The Less Than One Percenters
Paddy Power Betfair is one of the top 250 public companies on the LSE and can absorb the hit, but it’s the small, independent bookmakers that will really struggle. They may be left with less than one percent of total handle, according the Irish Bookmakers Association (IBA).
Chairman Sharon Byrne told The Racing Post that the budget will “kill the industry” and potentially annihilate all of the independent bookmakers in Ireland.
“It hasn’t been specified how it will be implemented, but a tax on the bookmakers takes no consideration for profitability or losses,” she said. “The businesses have been struggling to pay one percent so two will not work.”
After VAT, PRSI, PAYE, picture rights, etc, have been paid, they are left with a margin of about 0.75 per cent to 0.801 per cent, so a further one per cent on turnover just puts them into insolvency,” she added. “I’d imagine we are looking at all of the independents closing and maybe 100 to 125 of the big multiples’ shops.”
New Threat to Horseracing Funding
The move is also likely to negatively impact the horseracing industry in Ireland and the UK, whose funding has also been jeopardized by the UK’s decision to slash in the maximum stakes of fixed-odds betting terminals.
The racing industry received £39 million in media rights payments last year from bookmakers in Ireland, whose betting outlets pay for the right to broadcast races.
But fewer shops mean less funding for racing and the IBA estimates 300 of Ireland’s 850 betting shops could close.
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