Irish Government Shoots Itself in Foot Over Betting Tax

Posted on: November 6, 2018, 06:29h. 

Last updated on: November 6, 2018, 06:32h.

The decision to double the Irish betting tax was taken “without a detailed analysis of the economic consequences,” according to a professor of Economics, and could result in a loss for government coffers.

Irish betting tax
Irish finance minister Paschal Donohoe (pictured) may have grossly overestimated the revenues that will be derived from a hike in the Irish betting tax, according to Professor Foley. (Image: Press Association)

In a report commissioned by The Irish Bookmakers Association (IBA), Dublin City University Emeritus Associate Professor Anthony Foley suggests that consequential shop closures, job losses, and other “possible negative effects on the commercial viability and sustainability of bookmakers” will cancel out any potential gains for the Irish exchequer.

The IBA says it believes 400 of Ireland’s 850 betting shops will be put out of business, with small independents the worst impacted as they will be unable to absorb the shock of the tax hike. Some 2,400 jobs will be sacrificed, the IBA estimates.

Slim Margins

The government announced last month it would raise the levy on betting handle from one percent to two percent as part of its 2019 budget. That may not sound like a lot, but this is a tax on the volume of bets placed, not revenue.

Bookies generally keep around 6 to 8 percent of handle as gross-gaming revenue before they pay all their other expenses, such as sales taxes, staff wages, and image and media rights.

According to IBA chairwoman Sharon Byrne, many independent bookmakers operate on a margin of less than one percent once these deductions have been made, which will plunge them into liquidation.

While Ireland’s market-leading operator Paddy Power Betfair is capable of absorbing the hit, it remains the most exposed to its impact. Shares in the betting giant plunged on last month’s budget statement, with £250 million ($329 million) of its market capitalization wiped off in just over two hours.

£5 Million Shortfall

Foley concluded that the impact of 400 closures would cost the country €35 million ($40 million) in taxes, while the remaining outlets would generate around €30 million ($34.2 million), leaving the exchequer €5 million ($5.7 million) out of pocket. Irish finance Minister Paschal Donahoe claimed in his budget announcement the levy would bring €50  million ($57 million) in new revenue.

“Even if our estimates for shop closures are incorrect, and unfortunately I don’t think that’s the case, Professor Foley’s report shows this is far from being the cash cow that the government thinks it is,” Byrne told the Racing Post. “The two per cent is too crude a tax and too blunt. Maybe it’s time to look at an alternative tax in order to save the jobs of so many people as these are unnecessary job losses.

“The small bookmakers and independents will be wiped out if we don’t.”