Paddy Power to get €13m refund

IRISH gaming giant Paddy Power is to receive a cash-based tax refund of around €13 million later this year — over 10% of its 2010 operating profit — relating its operations in Australia.

Australia’s Federal Court recently ruled in favour of an appeal by the Dublin-headquartered bookmaking group against unclear legislation surrounding the payment of goods and services tax, which is the Australian equivalent of VAT, for gaming companies.

The appeal was made on behalf of Paddy Power’s Australian subsidiaries, Sportsbet and IAS and the refund relates to goods and services tax, paid by those two companies between October 2005 and the same month in 2009.

Paddy Power — which is due to publish first-half 2011 results later this month — initially bought a controlling stake of Sportsbet in 2009, before buying it outright last year and since adding, via Sportsbet, the IAS betting business to its portfolio.

The company’s challenge to the Australian tax legislation — which, it claimed was unclear and open to interpretation — was ruled in its favour of by the Federal Court in Australia and that decision is not being appealed by theAustralian Tax Office, which has already amended the relevant legislation.

That means that this judgment will not impact future tax periods, and will only act as a retrospective once-off instance.

That said, however, while Paddy Power will receive €13m this year, the full award amounts to €26m.

The second half of the tax gain, however, has been awarded to the company’s Australian operations as credit against goods and services tax, payable in future years.

Paddy Power issues its first-half results on August 30.

The company earlier this week added former Ulster Bank chief executive Cormac McCarthy to its board of directors in a non-executive capacity.

It said at its annual general meeting in May, that group revenues were up by over 20%, at that point, since the start of this year (on a year-on-year basis) and that it remains committed to job creation in Ireland, despite the potential effect of any proposed tax on revenues from online operations possibly putting the firm at a disadvantage to some of its competitors.

Last year saw the company produce a record set of annual results, with operating profits — Power’s chief growth metric — rising by 56% to just under €104m.

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