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Internet bookmakers to pay taxes for first time

Move aims to free taxpayers from €56m cost of subsidies given to horse racing

With only two days to go to this year's Cheltenham festival, it has emerged that online bookmakers operating in Ireland will be liable for the same betting taxes as high-street shops, to allow the horse racing industry pay for itself, the Sunday Independent has learned.

Agriculture Minister Simon Coveney is to bring forward legislation to subject all bookmakers taking bets from Irish punters to a one per cent tax on all of their transactions, to reduce the burden on the taxpayer who is subsidising racing to the tune of €56m a year.

The Sunday Independent has learned that Mr Coveney has also commissioned a major report into the horse-racing industry, which will focus on the industry authority, Horse Racing Ireland, which is under considerable attack from bookmakers.

To date, online betting operators have not been liable for taxation, whereas all bets made in high-street shops are subject to the one per cent betting tax.

Mr Coveney has not ruled out increasing the rate of taxation on betting in due course, but he is determined to ensure the industry pays for itself within the lifetime of this Government. The new law will require all bookmakers to pay for a licence to operate in Ireland. This means offshore operations will be drawn into the Irish tax net for the first time.

The large bookmakers -- including Ladbrokes, Boyle Sports and Paddy Power -- have been involved with Mr Coveney's department in the process. He said that while they are unhappy at the change, they understand that paying nothing on their online operations was unsustainable.

See Sport, Pages 11-13 & 16 John McEntee, Page 14

For their part, the bookies want a greater overhaul of the system.

In a submission to Mr Coveney last month, the traditional shops argued that given the sharp decline in their business, a turnover tax is not viable. The latest figures show that from a high of €3.66bn in 2008, turnover in shops fell to about €2.7bn last year. In the same period, online and telephone betting revenue rose from €700m to €900m.

Revenue from betting duty, however, has been declining. In 2001, betting returned almost €70m to the State but that has plummeted to under €30m.

As a result, the taxpayer has been forced to significantly prop up the Horse and Greyhound Racing Fund. This year, €56m has been earmarked for the fund.

Paddy Power's results for 2011 showed that while its international business grew, its Irish retail division profit fell by almost 40 per cent to €10.9m. In all, 79 per cent of its profits last year came from internet and mobile betting.

Paddy Power yesterday said the success of the tax would hinge on how it was policed. "It is essential that it is a level playing field. It will need to be robustly policed to ensure everyone pays the same. We have no problem paying tax on our online earnings, we realise the situation the country finds itself in," he said.

A major turf war is under way within racing with Horse Racing Ireland adamant that the bookies should be entirely funding the industry, while the bookies insist there is no pot of gold to go after.

Mr Coveney has commissioned a high-level review of the industry, and of Horse Racing Ireland, by consultancy firm Indecon.

It will focus on the make-up of the board with a view to improving its "business acumen and professional management of the industry", according to a source.

Sunday Independent