Ireland’s Finance Minister Paschal Donohoe (pictured) has decided not to change the country’s taxes on betting businesses for 2018 but will revisit the issue before announcing the budget for 2019. The minister had been considering three options that could have added as much as €50 million to the Exchequer for the coming year.

However, the issue is fraught with pitfalls and controversies with no immediate easy answer. The matter has pitted various interests in betting against each other with little understanding seeming to come from their respective proposals. When looking at the Irish betting model it is good to keep in mind that it is unique in the world with its own strengths and weaknesses. A fair decision that takes in all considerations, based on total taxation as well as potential profits and indeed the survival of small betting shops must be weighed against the government’s need for revenue, the horse racing industry, and large betting providers’ ability to continue serving the market.

While bookmakers at racetracks saw a 50% reduction in their tax rate in 2017 with more cuts expected later, they are still struggling to support their industry. In August, Horse Racing Ireland (HRI) called for bookmakers’ duties to be increased from the 1% they have paid since 2006 to 2.5% and to have punters pay the difference.

According to a report in today’s Irish Independent, a submission by Donohoe said in part, “[There is] the possibility of punters seeking out alternative untaxed forms of betting or a move towards unlicensed operators.” The proposal would also need a complicated formula to take into account exchanges like Betfair who is currently taxed on commissions.

The horse racing industry in Ireland is currently supported by all taxpayers via the Horse and Greyhound Racing Fund, and the HRI proposal along with raising betting exchange commission levies from 15% to 37.5% would provide the fund with money from punters only, rather than every taxpayer.

Minister Donohoe is well aware of the racing industry’s need for stabilization and development but worried that raising taxes now would not help government revenues much if the proceeds went to the racing industry.

“In the context of the historical link between betting revenues and the funding of the [racing] industry, any increase in betting receipts will be seen by some in the industry as being earmarked for the Horse and Greyhound Fund,” Donohoe said.

The Irish Bookmaker’s Association released a report in August that said that claiming Ireland has the ‘Lowest betting tax rate in the world’ doesn’t take into consideration that betting shops with less than €2 million in revenues already pay an effective tax rate of 614.7% with the inclusion of income tax, rates, VAT, betting duty, corporate tax, and 1% total tax. According to statistics compiled by the Association’s Tony Foley, raising the tax to 2% would result in the elimination of all profits for small shops with less than €2 million in taxable revenues, while bringing the effective tax rate for a €4m shop up to 96.1%.

According to the report, “With over 450 closures and 2500 job losses since 2008, an increase in betting tax would only serve to cause more closures and job losses”.

With bookmakers resisting a 1% increase in the betting tax on them and cautions over taxing punters, a scheme which has had less than favorable results in other countries, there was one final concept to consider – to tax the gross profits of bookmakers.

The minister’s submission stated: “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”.

While this may well be the course for next year’s budget, a workable plan has not yet been introduced and would take “significant additional work” before it could be.

So, for 2018 the industry will carry on under the present tax regime.

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