Bookies fear betting-tax increase will close shops
Racing industry says dependence on State funding isn't sustainable
Published 06/03/2011 | 05:00
THE incoming Fine Gael-led Government will have to tackle the issue of whether to raise the betting tax after Fianna Fail-led governments slashed the rate from 10 per cent to just 1 per cent.
During that time, racing in Ireland has become increasingly reliant on State funding to prop it up -- a position that is now untenable, according to Horse Racing Ireland.
It had been widely expected that the Government would double the tax rate on the betting industry to 2 per cent in its final Budget last December.
Finance Minister Brian Lenihan had announced his intention for a 1 per cent increase in the tax as far back as 2008. But in May of the following year, he announced that he was postponing the increase, saying it should not be implemented until the tax base was widened to include internet and telephone betting operators.
In the 2010 Budget, Mr Lenihan announced that he was extending betting tax to all forms of betting -- but he still did not increase the rate.
The decision came as a surprise to the racing industry, which received over €59m in support from the State last year alone.
Horse Racing Ireland has received some criticism because of the increase in the cost base of the agency over the last decade.
As first reported by Maeve Sheehan in the Sunday Independent, Taoiseach Brian Cowen had a half-hour meeting on November 19 last year -- just a couple of weeks before the Budget -- with Patrick Kennedy of the Paddy Power organisation, who was accompanied by Feargal O'Rourke.
Mr O'Rourke, who heads up tax and legal services for PricewaterhouseCoopers, is a son of the former Fianna Fail minister Mary O'Rourke and a first cousin of Brian Lenihan.
Mr Cowen has also had a 30-year friendship with a former chairman of Paddy Power, Fintan Drury, who remains a non-executive director of the betting firm.
During the election campaign, Labour leader Eamon Gilmore proposed a 1.5 per cent levy on all online and trackside wagers. Under the Labour plan, part of the cash raised would go towards maintaining the Horse and Greyhound Fund, which helps finance the racing industry.
"The public purse will no longer directly support the fund under Labour plans," Mr Gilmore said.
The issue of taxation in the betting industry is complex.
While there appears to be scope to increase taxation on larger and highly profitable operators, such as Paddy Power, the smaller independent bookies are struggling.
There have already been casualties in the betting industry, with the most high-profile being Celtic Bookmakers, headed up by Ivan Yates.
The Irish Bookmakers' Association said: "We are now concentrating on the new legislation that is being prepared to regulate the entire gambling industry.
"We need to ensure that it allows us to compete with offshore internet and phone companies and protects the businesses that are providing over 6,000 jobs in Ireland."
In 2008, there were 1,250 betting shops in Ireland, but since then 150 have closed their doors. That doesn't include the 47 shops in the Celtic stable and 20 outlets which were closed by William Hill late last year.
Boylesports is taking over a number of the Celtic outlets.
On the other side, horse racing continues to struggle and must get extra revenue to support an industry that provides thousands of jobs.
It has already been announced that total prize money will be cut by 5 per cent, from a forecast €46.6m this year to €44.1m in 2011.