OFFICIALLY, gambling is a taboo subject in this country. Betting is a minority pursuit, as only 17% of adults wager more than once a week.
The totality of gaming and gambling includes on and off course horse and greyhound betting, all forms of online gaming, amusement arcades, casinos, Lotto, card games, bingo and local lotteries. Combined industry estimates suggest it could be worth €8bn annually to our economy.
For three decades politicians and mandarins have sat on their hands in relation to gambling policy regarding regulatory frameworks, competition, employment and taxation. Non-bettors take an attitude of moral disapproval to the business. Asking them to address pragmatic issues is akin to seeking the legalisation of brothels and prostitution.
This typical ‘hear no evil, see no evil’ stance is unsustainable. Gaming and gambling is a mega multinational business. The internet revolution has transformed the modus operandi of the sector. Traditional fixed odds betting services are being supplanted by online betting exchanges. National boundaries are redundant due to cyberspace betting.
We still operate under the outdated 1931 Betting Act and 1956 Gaming and Lotteries legislation. For the past four years the Department of Justice has been contemplating an official review of the industry.
Even if there is a willingness at departmental level to grasp nettles, Dáil deputies will run for cover if it comes to enacting new legislation.
The betting landscape is being transformed — 50 new casinos have opened in Ireland. These principally provide gaming such as roulette and card games of poker and blackjack. These emporiums were never officially recognised and could be classified as unlawful gaming.
The legal loophole they availed of was that of private members’ clubs. To participate, you had to become a member at the entry door. Unlike in Britain, this is a simple, instant process. Operators are not liable to the 1% betting turnover tax or any other dedicated gambling revenue liability. Across the country, different garda superintendents applied separate interpretations of law enforcement — an Irish solution. The advent of Betfair, Betdaq and other betting exchanges has fundamentally altered the axis of punter and bookmaker. On any event, the customer can lay an outcome not to happen, ie, Man United to lose a match, Tiger Woods not to win the Open. Selecting one horse to lose against the rest of the field in any race is now a betting option. You can become a selective bookmaker. This undermines the whole process of ‘bookmaking’. This is based on pricing up the odds for each runner, so that there is an approximate 12% profit margin, irrespective of the result. For example, in a tennis match there are two possible outcomes. The combined odds of both at even money makes a 100% or break-even book. Odds of 10/11 each provide the margin of profit. The betting exchange layer sets his or her own price, based on their opinion. The overall effect? Reduce betting margins substantially, divert betting revenues towards exchanges and raise integrity ‘non-trier’ issues.
There is growing popularity among the younger generation to move away from racing bets due to perceptions of complexity and roguery. Bookmakers now promote their gaming websites rather than their sports products. Profit is more predictable from the poker table ‘rake’ than the vagaries of Ruby Walsh’s or Tony McCoy’s success.
Poker nights have appeared at a multiplicity of local venues, with Texas Holdem posters omnipresent — all devoid of any regulation. Older patrons, favouring a flutter, can enjoy the national scratch cards, parochial bingo halls and Rehab lotteries. It’s all business, with guaranteed profitability as the odds are fixed.
The only semblance of political interest in the entire area has come in the form of the racing industry’s desire to grab all revenue for itself. Horse Racing Ireland and Bord na gCon are the state bodies to develop and promote the horse and greyhound industries.
At the apex of the boom taxpayer subvention exceeded €70m yearly. This largesse funded development at racecourses and greyhound stadia. Prizemoney became the highest in Europe. The horse population expanded to unprecedented numbers of more than 18,000. Stallion breeding stud farms reaped a Klondike, which was tax-free.
The theory was that racing was the shop window for an industry employing 20,000 people. Underlying this proactive policy was an assumption that betting tax was an entitlement of the horse and dog world. In law, betting duty is an excise duty collected like any other source of taxation by the Revenue Commissioners.
If a government wishes to earmark it for a particular purpose, that’s a separate transaction. No one justified the proceeds of tax from a €10 bet by a jobseeker in Tallaght on Wayne Rooney to score the first goal rewarding Sheik Mohammed with enhanced prizemoney in the sport of kings. Senior politicians such as Charlie McCreevy, Brian Cowen and Bertie Ahern were regular racegoers. So, there was no basic quantifying of the merits of state investment in racing. The recession has hit all leisure sectors. Falling attendances and declining incomes have resulted in reduced betting revenues. The previous economic model of racing is unsustainable. Raising betting tax from 1% to 2%, irrespective of profitability, was attempted and rescinded. The next move is to widen the tax net onto online gambling and other forms of gaming to fund the sport. This narrow perspective is a failed and flawed approach.
INSTEAD, Ireland Inc can realise the potential of the gambling sector in the context of mobile international investment. The employment creation and revenue potential of relocating these businesses here is enormous. Gibraltar and the Isle of Man have become the location of choice to base global gaming operations.
The Irish betting industry faces serious commercial challenges. Between 2000 and 2006 the number of betting shops mushroomed from 700 to 1,200 (57% of this market is still fragmented among smaller, independent operators).
The requirement for consolidation, rationalisation and integration is inevitable. Licensing and taxation regimes within the sector are inequitable and incompatible. The regulatory environment for all other forms of gambling has either been ad hoc or non-existent. Amusement arcades are tolerated by some local authorities and prohibited elsewhere. The state has discriminated in favour of its own operations of the National Lottery and the Tote. Fairness necessitates a common tax treatment of all gambling businesses.
Moral concerns about addiction can be allayed through a comprehensive statutory enforcement of a code of conduct for the 0.3% of vulnerable gamblers. Gamcare provides this in Britain. New technologies must be embraced. Political cowardice and vested interests have resulted in anomalous confusion.
We must maximise investment and ensure the best ethical standards applying abroad. If we don’t, others will. Economic recovery is about seizing opportunity.
Ivan Yates is chairman and managing director of Celtic Bookmakers.
© Irish Examiner Ltd. All rights reserved