Ireland bookmakers were left scrambling when the Irish government confirmed that it will be implementing hefty tax hikes to betting for 2019.
The 2019 tax policy calls for betting duty taxes to increase from 1% to 2% on bookmakers, and from 15% to 25% on commissions earned by intermediaries/exchanges.
The new tax hikes will be particularly damaging for smaller betting operations, but the whole industry will eat a rather large hit regardless. The increase was only rumor for a time, but the government’s published changes to the tax policy confirmed the changes
Why the Increase?
Minister of Finance Paschal Donohoe described the gambling tax increase as “timely,” while also trying to justify it as an equalizer.
"In the area of betting, the Government's priority has been to level the playing field by extending the tax to remote (online) bookmakers and exchanges.”
In an exchange with RTE Radio 1, Donohoe defended his decision on the basis of need for the current economic climate.
”I have increased the tax because I do need to raise revenue to be able to pay for public services that we need overall. In the absence of agreement, I decided on something that needed to be done.”
The government expects that the tax hikes will raise an extra €40 million for the 2019 budget, and €52 million over 2019.
Independent Bookmakers Cry Foul
As expected, opponents have plenty to say about the tax hikes. However, there are plenty of good points made by various places.
Pearce Doherty, TD for the Donegal constituency, expressed alarm for smaller, individual bookmakers because the tax is implied to be paid by the bookmakers instead of allowing some of the tax burden onto .
"Big operators will absorb the increases, while high street betting offices are put to the wall. What should have been done is an increase to 3%, paid for by punter - that’s how you ensure big operators can’t put the small independents to the wall."
Sharon Byrne, chair of the Irish Bookmakers Association expressed similar alarm toward the tax, estimating that the tax could put hundreds of independent shops out of business.
“We estimate for a typical independent operator with a modest turnover of €2m per shop, that they are already paying six times more in tax than the profit made per year in that shop. A 1% increase would wipe out any profit made in that shop and cause them to be loss making if their gross margin was to drop below 12%, which is highly probable. The business is characterised by very low margins and any change in our cost base could be catastrophic, particularly to the smaller operators.”
McCann Fitzgerald Tax Group's Alan Heuston:
"This increase in the rate of turnover tax will be particularly damaging to the retail sector, particularly for small to medium enterprises. 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. Therefore, the proposed increase in exchequer funding of €50m may very well be a lot less as a result of the impact on businesses.”
Major companies aren’t exactly happy about the increase either. Paddy Power Betfair released their own note to shareholders, expressing concerns about the bottom line at the end of 2019. While they don’t predict going out of business, they do expect a serious hit.
"If these increased rates had applied to the Group's Irish sportsbook stakes and exchange revenues in the 12 months ended 30 June 2018 we would have paid an additional £20 million of betting duty."