The Finance Minister for Ireland, Paschal Donohoe, announced last Tuesday that, as part of the country’s new budget, gambling taxes levied on licensed operators in the country will double as of January 2019. Bearing in mind that Ireland’s apparently low rate of 1% in gambling taxes are applied to turnover, not to profits, doubling this is a huge hit to bookies. Paddy Power Betfair’s shares took a tumble on the FTSE as a result, dropping by nearly 5%. The firm issued a statement that its annual tax duty would have been around €23 million higher had this tax hike applied to their 2017-18 year up to June 30th. Donohoe further announced that there would be a concurrent rise in betting duty on commission earned by betting exchanges or intermediaries, from 15% to 25%.
The Irish Bookmakers Association (IBA) have stated that this change in the tax rate will have a “disproportionate effect” on the smaller bookies, and have predicted that it could lead to 300 betting shop closures and the loss of 1,500 jobs. The IBA further suggested that firms turning over under €2 million annually would see likely their profits disappear entirely. Chairwoman Sharon Byrne said in a statement that this decision was “disappointing… the Government conceded to this demand by politicians who never engaged with the industry or understood the profound effect a turnover tax can have on so many jobs”.
Gambling tax reform in Ireland is something the industry is not that opposed to, provided it comes in the form of a tax on profits. This would level the playing field and support smaller independent firms’ survival in the face of tough competition with large companies, such as Paddy Power. Both will take a hit from this news, but the latter will certainly do better overall.
