Paddy Power Betfair flags €23m cost from budget betting tax move

Paddy Power Betfair estimates that the proposed doubling of the Republic's betting tax to 2 per cent could cost the gambling giant almost €23 million a year.

The Minister for Finance, Paschal Donohoe, announced in his Budget 2019 speech that the Government planned to increase the 1 per cent tax on betting turnover to 2 per cent from January 1st.

The State also plans to increase its take of the commission earned by betting exchanges such as Betfair to 25 per cent from 15 per cent.

In a statement, Paddy Power Betfair said if the increases had been applied to its Irish businesses in the 12 months ended June 30th 2018 “we would have paid an additional £20 million sterling (€22.8 million) of betting duty”.

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The group has 261 betting shops in the Republic while its Paddy Power and Betfair websites have a significant number of subscribers living in the jurisdiction.

Mr Donohoe said the increase should raise an extra €51.6 million a year in tax.

Bookmakers must absorb the current 1 per cent charge. Mr Donohoe did not indicate if gambling companies would be allowed pass on part or all of the increased tax to customers.

Michael Mitchell and Joseph Quinn, analysts with Dublin stockbrokers, Davy, estimated that the £20 million additional tax could cut Paddy Power Betfair's earnings by about 4 per cent.

They noted that the Republic was an important market for the group, accounting for 9 per cent to 10 per cent of its revenues.

Close shops

The Irish Bookmakers Association, the representative body for more than 700 Irish betting shops, predicted that the tax would close almost half of its members’ outlets.

Chief executive Sharon Byrne predicted that some 1,500 jobs could be lost.

“It’s absolutely horrific and it’s hitting hardest the little guys. Four hundred and fifty shops closed in the recession, leaving just 200 of them and their shops are absolutely unviable at a 2 per cent turnover tax,” she said.

Solicitor Alan Heuston, partner in McCann FitzGerald and head of the firm's betting and gaming group, agreed that the increase would close betting shops and said it would drive punters to black-market operators.

“We’ve already seen a drop in the number of licensed retail premises but this increase may result in further consolidation and closures and, subsequently, job losses and a loss of tax to the exchequer,” he said.

Mr Heuston suggested that as a result the increase would raise less than the €50 million that the Government hopes.

“It could also drive customers to black market operators who operate remotely and do not pay the existing 1 per cent rate of tax,” he added.