Shares in Paddy Power tumble as betting tax doubles
Shares in Paddy Power Betfair fell almost 5pc after the Finance Minister announced plans to double the betting tax levy to 2pc from 1pc.
Paschal Donohoe also announced plans to increase the betting duty on the commission earned by betting intermediaries or exchanges to 25pc from 15pc.
In a statement, Paddy Power Betfair said that if the increased rates had applied to its sportsbook stakes and betting exchange revenues in the 12 months ending June 30, it would have paid an extra €23m in betting tax.
Commenting on the minister's decision, Joe Quinn, of Davy Stockbrokers, said that it has resulted in Ireland "now having one of the more penal regulatory backdrops for gaming in the world, equating to around 30pc tax on online net revenues".
The tax will affect Paddy Power Betfair earnings by 4.3pc, based on Davy's current 2018 and 2019 results forecast for the company.
"Ireland is an important market for Paddy Power Betfair, we estimate the region represents 9-10pc of group revenues, principally via its retail division…furthermore circa 10pc of European online revenue is derived from the country," Mr Quinn added.
Meanwhile, the Irish Bookmakers Association (IBA) has warned that the doubling of the betting tax levy will have a disproportionate impact on smaller independent betting retailers around the country.
Sharon Byrne, chairperson of the IBA, said that as many as 300 betting shops will close when the tax is implemented, with the loss of around 1,500 jobs.
The association, which is the largest representative body for the bookmaking industry in Ireland, added that the doubling of the tax would "wipe out" the profits of betting shops with an annual turnover of less than €2m.
Speaking to the Irish Independent, Ms Byrne said that had the levy been put on bookmaker profits, it would be "a totally different conversation".
"Already since the Budget measures were announced, I have spoken to a number of small independent bookmakers, some of whom have been in business for more than 40 years, who now believe they have no option but to let their staff go and close their doors," she added.
Ms Byrne's sentiments were echoed by Davy Stockbrokers, who said that the betting retail market would be affected as a result of the decision to double the betting levy, allowing larger operators to partially offset an increase in their cost base with a higher share of the retail market.
Both betting tax increases will take effect from January 1, 2019.
It is anticipated that the taxes will generate an additional €40m in 2019, some of which is expected to be set aside to fund addiction services.