This article was originally published in World Online Gaming Law Report, 9(6), June 2010.

In May this year, Taoiseach Brian Cowen (the Irish Prime Minister), announced that the Irish Government is to tax online betting and to introduce licences for overseas betting providers. He stated:

The Government will introduce legislation to ensure that overseas betting providers comply with a licensing regime that will permit them to sell their products into our jurisdiction. This will have the additional benefit of facilitating the extension of the tax regime for the betting industry to all those providing online and telephone betting and so underpin funding for the racing industry.

This is of little surprise. Last year, the Minister for Finance, Brian Lenihan commented that the tax base was not wide enough for the operation of an online duty and the Minister stated that he intended to consider how best betting duty might be applied in the context of the 2010 Budget, including by examining the UK's gross profit tax model and the issue of the taxability of the substantial volume of betting and gambling which takes place outside the traditional bookmaking setting, referring - of course - to online and telephone betting.

Almost all parties in Ireland agree that the current gambling laws do not adequately address online gambling. Most also believe that the regulation of online gambling could provide tax revenue and jobs, yet parties differ as to how this should be done.

Proposals by the Irish Labour Party

More recently, the Irish Labour Party published a Policy Document entitled "Raising the Stakes which outlined a proposed licensing regime which would align the status of online operators with that of land based operators.

The Irish Bookmakers Association (IBA) responded to such proposed by stating that such proposals, if implemented, would pose a number of significant difficulties for the sector. The IBA stated that it was very concerned at the level and type of tax regime that the Labour Party had outlined in its document. It continued, betting on Irish events including horse and greyhound racing accounts for less than 15% of total business, yet it is proposed to retain a tax on 100% of turnover. The IBA argued that the level of funding that bookmakers are responsible for should take into account the fact that the vast majority of business is not derived from Irish events. However, the IBA welcomed the document as an important contribution to a debate that should take place on reform of betting and racing in Ireland today.1

Horse Racing Ireland

The recent momentum behind the taxation of online betting appears to be due to the funding difficulties being experience by Horse Racing Ireland (HRI) (the Irish body responsible for the overall administration of Irish horse racing) as a result of recent budget cuts. By way of background, the Horse and Greyhound Racing Fund was established at a time when annual income from excise duty collected on off-course betting - the funding stream for the Fund - was in the region of €60m per annum. Receipts from excise duty on off-course betting dropped to €31m in 2010. The Exchequer contributed in excess of €31m to the Fund in 2009 and a further €28m in 2010.

However, given recent budget cuts, it is now proposed that the tax net be cast wider to fund the industry. Taoiseach Brian Cowen believes that such support should continue to come from the proceeds of betting duty. He stated "All forms of betting including betting offered over the Internet, other remote platforms or over the telephone should make a contribution. Such betting must be brought within the tax net, not just because it will increase revenue, but also because it will mean that those currently not contributing to securing the future of important indigenous industries will now make that contribution."

Paddy Power has been vocal in its objections to the direct link between funding for HRI and taxation of betting. Paddy Power of Paddy Power bookmakers stated that the company had no problem with paying a tax that was enforceable across the industry, but he questioned the merits of that revenue automatically going to the Irish racing industry. He stated "This highlights again how the link between betting and racing needs to be questioned", "I agree we should be paying tax, and if the Government then decides that revenue should go to racing, then fine. But it shouldn't be promised away like this with no strings attached. It is illogical that there is still such a link between Irish racing and betting. Just 11 per cent of our turnover is on Irish racing".2

Other Proposals

The IBA believes that the reform that is needed in this area is the introduction of a tax on profits. It argues that a tax on profit would be a far fairer way to deal with the issue of taxation and would also generate inward investment.

Paddy Power has proposed a one per cent turnover tax on all entities that benefit from Irish racing. It has proposed that the one per cent turnover tax paid by off-course bookmakers be extended to Tote turnover, race meeting vendors' turnover, stallion fees, Irish thoroughbred sales and training fees. It has also proposed introducing a licence for internet and telephone bookmakers, taxing casinos and setting prize money at a 20 per cent premium to British bookmakers.


While Paddy Power's proposals were branded an "absolute non runner" by the Irish Racehorse Trainers' Association, the proposals are nevertheless a welcome addition into the debate regarding the approach for Ireland's racing and betting industry. However the fact remains that taxing Internet and telephone betting is far harder than it sounds. The vast majority of telephone and Internet operators have no physical presence in this jurisdiction. Whatever the Government does, it will have to walk a tightrope between Irish and foreign based operators and ensure that Irish operators are not unfairly punished from a taxation point of view as a result of its Irish base. Otherwise, it is fair to say that such operations may well leave Ireland behind.

However, the Minister for Finance seems alive to this issue. Last year, the Minister stated that he contemplated widening the anti-avoidance mechanism to cover off-shore telephone facility. However, he stated that the difficulty is that some of the large, multiple bookmaker firms base their telephone operations outside the jurisdiction. He explained that those who base such operations within the jurisdiction give employment within the jurisdiction, and he feared that if such an anti-avoidance mechanism was extended to telephone operations, such firms could remove themselves to Northern Ireland or elsewhere, with the resulting loss of jobs. The Minister concluded that he was not prepared to take that risk in the short term and would consider the matter further.

Taoiseach Brian Cowen stated that he wanted the matter of taxation of online betting concluded this year. The Budget later this year should make for interesting reading if measures are not introduced sooner.

For further information please contact Áine Matthews of the Gaming and Gambling Unit.


2. The Irish Times, 15 May 2010.

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