Ireland is often seen as a country renowned for its betting – and horse and greyhound racing is incredibly popular with residents.
Operators, however, are going to find themselves faced with an undesirable tax rate hike, with the betting tax rising from 1% to 2% in 2019.
Minister for Finance – Paschal Donohoe – revealed the price hike on Tuesday the 9th of October during his 2019 Budget speech, stating: “In the area of betting, the Government’s priority has been to level the playing field by extending the tax to remote bookmakers and exchanges.”
“This was achieved in 2015 and I believe it is timely to increase the tax from 1% to 2% on amounts wagered in the state. In addition, betting duty on the commission earned by intermediaries, or exchanges, will increase from 15% to 25%.”
Despite the tax rate still remaining relatively low, bookmakers are expected to greet the change negatively, and what makes this situation interesting, is that it’s likely the Irish Government will stop betting firms from passing on the tax rise to consumers.
In an already hyper-competitive market, this will likely make it increasingly harder for smaller companies (like betting shops and non-mainstream online sites) to operate and maintain their business.
For the Irish government, however, the move it set to generate an additional €40m in revenue in 2019 alone – providing a well-received boost to the country’s economy.
Naturally, the tax hike has already drawn criticism from operators, with Alan Heuston – a partner in the McCann FitzGerald Tax Group and head of the firm’s betting and Gaming Group – saying: “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.”
“It could also drive customers to black market operators who operate remotely and do not pay the existing 1% rate of tax. Customers are sensitive to pricing so if black market operators can offer more attractive prices it would be a natural attraction.”
“Any increase in the rates of tax that apply to betting in Ireland needs to be considered as part of an overhaul of the current outdated regulatory regime which exists in Ireland for betting and gaming. Any changes that are introduced need to strike an appropriate balance between encouraging commercial and responsible gambling operators and protecting consumer and vulnerable gamblers.”
It remains to be seen as whether the tax rate increase will be sustainable for the bookmakers or not, but it looks certain to come into force early January next year, so operators will already be trying to find ways to decrease the impact on their businesses.