26th of September 2010 Author: Johnny Karp
Winnings tax would shut 33 percent of betting shops
Speculation that Irish Finance Minister Brian Lenihan is likely to introduce a 2 percent tax on winning bets soon has seriously alarmed betting companies.
Reporting on the issue, The Irish Examiner notes that thousands of jobs could be lost and a third of betting shops might close if such a tax was to be introduced in December's budget.
Bookmakers in Ireland have said that while such a tax might raise Euro 60 billion a year, punters would face a 2 percent hit on all winning bets, reducing the appeal of gambling. Some anticipated that many betting shop owners would absorb the charge on payouts in order to prevent gamblers switching to online and telephone betting operators based outside Ireland who are not taxed. Irish bookmakers currently pay a 1 percent duty on turnover.
That would means cuts in operating costs elsewhere in their companies, and could result in job losses and shop closures.
The Irish Bookmakers' Association expressed concern over the weekend, observing that a further tax on the betting industry would drive punters to overseas betting services and result in the closure of one-third of existing betting shops in the Republic.
"We believe that 400 of the 1,200 would shut up overnight. It would kill jobs in the industry," said IBA chairwoman Sharon Byrne. The sector employs 6,500 people.
Ms Byrne claimed such a tax would place Irish betting shops at a further competitive disadvantage to foreign-based online and telephone betting operators. The IBA pointed out that turnover at most betting shops had fallen by up to 40 percent over the past two years due to competition from offshore operators as well as the general downturn in the economy.
The organisation has also proposed an alternative means of raising revenue through a new licensing tax to cover betting shop, online and telephone exchange operators which the IBA claims would create an additional 3,000 jobs.
"Paradoxically, therefore, rather than strengthening the contribution of the betting sector to the Irish Exchequer this new taxation would have the opposite effect," said Ms Byrne.
A spokesperson for Paddy Power bookmakers described the proposed tax as "insane".
The Irish Examiner says that a number of sources have alleged that the 2 percent tax was proposed by Horse Racing Ireland, the administrative body of the horse racing industry, which is concerned about a Euro 30 million shortfall between revenue from betting tax and government funding for horse and dog racing.
However, any money collected from a new betting tax is unlikely to be "ring-fenced" for the horse racing industry because of the wider budgetary concerns of the Government.
HRI chief executive Brian Kavanagh denied that it had made any submission for a 2 percent tax on winning bets to the Department of Finance, although he acknowledged that ongoing discussions about the funding of the industry are being held with a number of Government departments.
The HRI has nevertheless emphasised that Ireland has the lowest betting tax in the European Union with annual revenue from gambling currently at Euro 31 million compared to Euro 67 million in 2001 despite a fourfold increase in betting turnover over that period.
A spokesperson for the government's Department of Finance refused to comment on the issue, claiming all taxation matters would be dealt with in the forthcoming budget.
There is also speculation that another tax idea currently being considered by the Irish government is the wider reform of taxation on the gambling industry by extending the existing 1 percent tax rate on turnover to internet operators active in Ireland.
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