THE MINISTER FOR Finance has said there is “insufficient legal certainty” to change how the State taxes the gambling sector, and indicated he wouldn’t be doing so in the upcoming Budget 2020.

Paschal Donohoe said that there wasn’t a “compelling case” to switch from the current levy on all bets to a tax on profits, despite extensive lobbying from industry in recent times.

The minister said industry had put forward a model based on the UK system for taxing bookmakers, but that the “critical difference” from the British model was that it proposed different rates for retail and online activities.

The government has sought to introduce new legislation for the gambling industry as far back as 2013, but so far failed to do so, and it’s understood that to enact that legislation now wouldn’t be sufficient given the technological advances in the industry in the past six years.

Earlier this year, the government approved plans to establish a gambling regulatory authority in Ireland. The new gambling authority would be given the power to develop and enforce necessary and appropriate licencing and regulatory measures in respect of all gambling activities, including online betting.

In lieu of that authority yet being in place, the gambling industry has lobbied consistently over the past year for the recent increase in betting duty to be reversed. 

Gambling tax

The way that the government taxes the betting industry is on turnover – so that companies pay tax on every euro a person stakes in a bet.

In Budget 2019, Minister Donohoe raised gambling duty from 1% of turnover to 2%. 

Under the 1% rate, the government collected just over €50 million a year, with this expected to double to €100 million with the rate increase.

This was met with dismay by the gambling industry, which warned that bookies – particularly those based in rural areas – would go out of business as a result. 

In the wake of Budget 2019, Paddy Power Betfair chairman Gary McGann requested an urgent meeting with the minister to discuss the tax increase.

“This budgetary move does give the impression that Ireland is less interested in companies like PPB than it is in foreign investment,” he said. “I hope you can facilitate a meeting at some stage in the coming days.”

No such meeting took place. 

Minister for Finance Paschal Donohoe told the Dáil in February that it was “too early to draw any conclusions on the impact of these increases”.

Donohoe said he had sympathy for small bookmakers who may have ongoing problems competing with large retail and online bookmakers.

“However, I could not apply the increase in betting duty to some bookmakers and not others,” he said. “In any discussion on betting duty, we must acknowledge the raised public consciousness of the problem of gambling in society.”

Lobbying

The Irish Bookmakers Association (IBA) has extensively lobbied in the past year to get the betting tax reversed.

It said that 35 shops across the country have closed as a result of the betting duty increase that came into effect on 1 January. 

The IBA – which represents over 700 shops in Ireland – claims it will ultimately result in thousands of job losses across rural Ireland.

It has met with several politicians in recent months to outline the “severe unintended consequences” of the doubling of the tax, it said. 

“A fairer tax mechanism could be introduced,” the IBA said. “Betting tax is unlike all other taxes – it is charged on turnover despite making a profit or loss and it must be borne by the bookie as it cannot be passed on to customers.”

It argued instead for a tax on profits made by the bookmaker which would be more equitable than charging on every bet made, regardless of if the bookie wins or loses.

The minister had previously indicated he would look at the proposals put forth by the betting industry.

In response to a parliamentary question last week, Donohoe indicated that his officials had discussed the matter at European level before coming to its decision.

“In relation to the proposal to apply differentiated rates through a gross profits model, following consultation with the European Commission, my officials have advised that it is clear that there is insufficient legal certainty to proceed with any such proposal at this time,” he said.

The key element of the proposal was the differentiated rates for the retail and online sectors and my Department does not see any compelling case to change from the current model to a gross profits model at this point in time.