Paschal kicked gambling tax hike to touch af ter warning over job losses
FINANCE Minister Paschal Donohoe kicked to touch on the prospect of doubling the tax on betting amid warnings of jobs losses from the bookmaking industry. The Department of Finance had presented three options that could have raised up to €50million extra from bookies or punters as part of a review of betting tax.
Since 2015, mainstream bookmakers like Paddy Power, Boyle Sports, William Hill and Ladbrokes pay a 1% tax on the amount a customer bets with them, while a 15% gross profit tax is levied on online betting ‘intermediaries’ or exchanges such as Betfair.
But although the Department acknowledged there has been ‘ongoing pressure’ to increase the tax, Mr Donohoe decided he would leave the 1% rate alone and reconsider the increase next year. The Department had received multiple submissions from the betting industry who had warned an extension of the tax could be ‘potentially damaging’.
They said it could lead to closure of businesses and job losses, with a ‘particularly stark’ risk for individual or smaller operators.
A submission for Minister Donohoe said: ‘A total of 13 submissions were received. Of these, eight were from the betting/gaming industry, two were from the horse racing industry, one from the addiction advocacy service and two from individuals. Follow-on meetings were held with six of these...’
The Departmental submission explained there was ‘ongoing pressure’ to increase the tax. Mr Donohoe was told there were three options open to him. The first was to increase the rate from 1% to 2%. It would have raised an additional €50million but was being resisted by the bookmaking industry.
The second was to tax the punter rather than the bookies, which the Department said would come with its own set of risks.
‘[There is] the possibility of punters seeking out alternative untaxed forms of betting or a move towards unlicensed operators,’ the submission explained.
It would also be complicated by having to tax betting exchanges such as Betfair where tax is currently based on the commission charged.
The minister was also told that other countries had suffered a ‘negative experience’ when they tried to tax the punter.
The last option suggested a special tax on the gross profits of bookmaking firms. Paddy Power Betfair, for instance, had operating profits of £91million sterling in the first quarter of 2017.
The submission explained: ‘There is no doubt that a move to gross profits would be of advantage to business, as the level of tax payable will change in response to margins.
‘From a revenue point of view there is less stability around the yield of the tax and it is more susceptible to changes in the trade environment.’
However, Mr Donohoe was told such a gross profits tax would require ‘significant additional work’ before it could be introduced. He was also told that even if extra revenue was earned from betting taxes, there was an expectation by some that it would go directly to the horse and greyhound industry.
‘In the context of the historical link between betting revenues and the funding of the […] industry, any increase in betting receipts will be seen by some in the industry as being earmarked for the Horse and Greyhound Fund,’ the submission said.
In his response to the document, Mr Donohoe said he had ‘decided not to change this rate in Budget 18’.
A statement from his Department said: ‘[The Minister] took the decision that any potential actions on foot of the Betting Tax Review should be considered as part of Budget 2019.’
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Could lead to closures