Friday 2 December 2016

A lack of proper gambling regulation is far too big a risk to simply take a punt on

Published 02/07/2015 | 02:30

Who is gaining from the paralysis in monitoring gambling?
Who is gaining from the paralysis in monitoring gambling?

It is hard to believe there could be an industry in Ireland employing thousands of people, taking in billions of euro, growing and becoming internationalised, but is still largely regulated under legislation dating from 1931 and 1956.

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Gambling, from bookie shops and amusement arcades, to small casinos and online bets, still does not have an adequate system of regulation and laws.

This is even more surprising given that the main bookie chains and casinos, all say they want the industry to be fully and properly regulated. They would welcome legislation.

There is something about the gambling industry that makes Irish politicians move at a glacial pace. Back in 2008, when Dermot Ahern was Minister for Justice he published a report, following a consultation, into the regulation of gambling.

Since then very little has actually happened. Brian Lenihan dithered and changed his mind about raising the betting tax from 1pc despite the fact the tax was yielding less than it was 20 years earlier.

Since 2008 online gambling has exploded and is growing rapidly. Eventually, Michael Noonan extended the 1pc betting tax to online bets. And then in July 2013, exactly two years ago, Alan Shatter published the Gambling Control Bill.

This would create a new regulatory authority; define various forms of gambling; distinguish the tax treatment of various activities; issue licences; have measures to protect people from problem gambling and a whole lot more.

It also prohibited super casinos, because it restricted the largest gambling facility to 15 tables. Unfortunately, none of it has been implemented and the bill has not progressed.

Everything is still the same. Yet, the problems persist and may even be getting worse.

The Gaming & Leisure Association of Ireland (GLAI), which represents private member clubs, published a pre-budget submission earlier in the week. It estimates there are up to 8,700 unlicensed gaming machines in Ireland. It estimated that on average these machines take in €8,961 per year each.

It also believes that improper licencing of machines is widespread. It estimates that 5,000 of the 7,559 licences granted for amusement machines are in fact gaming machines. According to GLAI, proper licencing could yield up to €10.9m to the state in licence fees and Vat.

But the anomalies in the gambling sector are even wider. There is insufficient clarity on the tax obligations associated with certain activities because the legislation is so outdated.

One example is virtual roulette machines in bookmaker shops. Tax on these machines is paid under the 1pc Betting Duty rate. An actual physical roulette table would carry a Vat rate of 23pc.

GLAI says the Revenue Commissioners are of the view that gaming in a licenced bookmaking shop is in breach of the current legislation. What is betting and what is gaming?

Betting means making a wager on the outcome of something, such as a race or football match, where the outcome is not decided in advance.

Bet Beware, a group concerned about problems with gambling, told an Oireachtas Justice committee in October 2013, that "serious doubts" remained over the integrity and fairness of virtual events, predominantly in the form of virtual horse or cycle races, regarding the possibility of bias in favour of the operator/house.

It doesn't mean you can't win, but if true, it would suggest that activities like this should be classified as gaming and not betting. Bet Beware wanted better definitions in relation to casino games, fixed odds betting terminals and licenced bookmakers. The Irish Bookmakers' Association and others called for greater clarity around definitions.

In its report the Justice Committee concluded that: "The treatment of any form of gambling involving "virtual events‟ (such as virtual Roulette, Racing and Poker Machines etc.) merits closer scrutiny in future iterations of the General Scheme and the Committee proposes serious consideration be given to an outright ban of this form of gambling."

The GLAI believes greater clarity around what constitutes gaming in relation to these activities could yield between €6.6m and €13.2m per year for the exchequer.

Private gambling clubs have their own problems too. They are "designated" bodies under the money laundering legislation which means they must comply fully with its rules. However, because the Gambling Control Bill is gathering dust, they are still not properly regulated at all.

The GLAI says clubs pay Vat at 23pc on gaming activities. Some are unscrupulously closing and re-opening companies to avoid Vat. Some argue that EU Vat rules on gaming do not apply in Irish legislation and are asserting their gaming is not subject to Vat at all.

Tidying up this mess could be worth another €3m to €5m per year to the exchequer.

Sometimes things slip through the cracks and go under the radar in business for a long time. Eventually, there is a spotlight thrown on it and something happens.

When it comes to the regulation of gambling, there is a kind of political paralysis, and it isn't clear why. The spotlight was thrown on it a long time ago. Aspects of the industry remain firmly in Wild West territory, while others are simply suffering from out-of-date legislation that has failed to keep pace with the rapid change.

It has been seven years since Dermot Ahern's consultation on this subject. It then took another five years to get Alan Shatter's bill. Another two years have gone by and there is still no regulation.

You would have to ask, who is gaining from the paralysis? The grey areas in the law and the lack of enforcement are definitely suiting the Wild West faction. But are the big players also benefiting financially from the political lack of will to properly regulate this multi-billion euro industry?

Enormous sums of money are being made. Technology is changing the face of gambling almost every week while the law works off 1931 and 1956 definitions.

There are three aspects to the problems. One is protecting people, the other is overall regulation of a sector and the third is Revenue.

The Revenue Commissioners cannot go charging in and splitting hairs on various practices without proper legal definitions. Otherwise they would be tied up in court for years.

The issue of protecting people is very important. The Gambling Control Bill covers this area but without it being passed into law, it falls to the main players in the sector to self-regulate.

Many of them will behave responsibly but it isn't a satisfactory system.

Regulation right now is scattered and inadequate. The Bill would put a comprehensive regulatory framework in place.

Do we need another quango? Well actually yes we do. The current situation is not transparent enough, supervised enough and isn't strong enough on consumer protections.

Gamblers are consumers too.

There is a wider debate about the development of the industry. The GLAI points to the success of places like Malta, Isle of Man and Gibraltar as centres for location of online gambling operations.

There are over 500 online gaming companies registered in Malta and it employs around 5,000 people.

The industry argument is that we could become a major international centre for the location and registration of gambling operations if it was all backed up by a proper regulatory system.

Undoubtedly there could be jobs and tax revenues from it, but is it how we want to position ourselves internationally?

As the Irish government tries to convince the EU, the OECD and Washington that we are not a tax haven, this kind of hub for offshore gambling operations is not the way to go.

If we don't want the companies registering here, then we hardly want big casinos either.

The Alan Shatter bill signalled the end of the proposed giant casino plan for Two Mile Borris backed by Richard Quirke and supported by Michael Lowry.

Failure to progress the Bill to legislation means that particular proposal ain't over till its over.

Gambling can be a hugely enjoyable pastime. You can have good days and bad days and enjoy the overall experience. The personal and social cost can be enormous, yet we are relying largely on self-regulation in this area.

There have been multiple studies and consultations on this subject over the last seven years.

The Oireachtas Committee on Justice made a number of recommendations for the Bill. Unfortunately, some of them involved further consultation on several issues.

There is only so much talking one can do. Surely, if it was going to take this long, an interim regulatory system could have been put in place.

Instead of being the best small country to do business in ,we seem to be the best small country in which to place a bet.

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