Saturday May 12, 2012 :  ONLINE GAMBLING GOOD FOR THE IRISH TAXMAN
 
Initial taxes will raise Euro 50 million for cash-strapped government
 
Ireland's politicians are gearing up to pass a bill before the summer recess of parliament that will impose a tax of 1 percent of turnover on internet gambling companies handling Irish bets, and more on betting exchanges reports the Irish Examiner.
 
Early estimates from a private study are that in its first year of application the tax will be paid by 77 percent of operators, delivering around Euro 50 million to the fiscus.
 
Companies like Paddy Power, Boyle Sports, William Hill and Ladbrokes will be among the reputable, well established and therefore easiest targeted betting companies, whilst a special 15 percent tax on gross profit has been devised for betting exchanges like Betdaq and 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," the newspaper reports.
 
Research commissioned by Betfair and carried out by professional services independent PricewaterhouseCoopers has estimated that the taxes proposed by the government would absorb 77 percent of the market between 2013 to 2016 and net Euro 49.8 million in tax revenues for the Irish taxman.
 
PwC found that the more punitive the tax, the less effective it is likely to be, pointing out that a tax rate of 2 percent on turnover and 20 percent on gross profits for betting exchanges would likely absorb less of the market next year (only 56 percent) and result in a smaller tax benefit to the state of Euro 43.8 million.
 
Ladbrokes recently said that it wanted a standard 7.5 percent gross profit tax for both bookmakers and exchanges, while Betfair has expressed satisfaction with the current proposals, but would rather see the entire industry taxed on a gross profit basis.

Analysts estimate that the 1 percent turnover tax could reduce annual operating profits of Paddy Power to the tune of Euro 6 million to Euro 7 million, and the 15 percent gross profit tax may take GBP 1.5 million a year out of the Irish profits of companies like Betfair.