Online betting to yield €50m

The Government’s planned online betting tax is expected to raise nearly €50 million for the Exchequer in its first three years and absorb payment from almost 80% of relevant companies in its first year.

Legislation paving the way for the introduction of the tax next year is expected to be passed before the Dáil’s summer recess.

The Government is looking to place a 1% turnover tax on the online operations of mainstream betting companies like Paddy Power, Boyle Sports, William Hill and Ladbrokes; and a 15% gross profit tax on online betting exchanges such as Betfair.

Some of the larger mainstream operators have welcomed the tax initiative, but are concerned about the Government’s ability to create a level playing field and succeed in taxing all companies who generate revenue from Irish customers via their online offerings.

But, a new report looking at the regulation of online betting in the Irish market — conducted by professional services firm PricewaterhouseCoopers (PwC) on behalf of Betfair — has estimated that the 1% turnover/15% gross profit tax would absorb 77% of the market in 2013 and net €49.8m in tax take, for the state, between 2013 and 2016.

It added that a higher tax rate — with a 2% turnover take from mainstream bookies’ online interests and a 20% tax on gross profit from exchanges having also been mooted as an alternative — would likely absorb less of the market next year (only 56%) and result in a smaller tax take, of approximately €43.8m.

Ladbrokes recently said that it wanted a standard 7.5% gross profit tax for both bookmakers and exchanges, while Betfair — which has expressed satisfaction with the proposals — had preferred the entire industry to be taxed on a gross profit basis.

It has been estimated that the 1% turnover tax could hit annual operating profits of the likes of Paddy Power to the tune of €6m-€7m, while the 15% gross profit tax could make a £1.5m (€1.9m) dent in the Irish profits of Betfair.