Ireland’s gambling industry will meet for crisis talks on Friday after the government confirmed the gambling tax rate would be doubled in January.
The council of the Irish Bookmakers Association (IBA) will assemble later this week, with representatives from Paddy Power Betfair, Ladbrokes and Boylesports and the independent sector among those who will discuss how the industry can pressure the government to reverse its decision to raise the tax from 1% to 2% of turnover.
Action such as strikes and picketing has been suggested by some, with the IBA estimating that 1,500 jobs will be lost and hundreds of independent companies will go out of business.
Paddy Power Betfair’s share price fell by as much as 7% in the aftermath of Finance Minister Paschal Donohoe’s Budget announcement on the rise in the point-of-consumption turnover tax, which the government hopes will raise €50m. That figure has been branded a “fantasy” by the IBA.
Speaking to FortuneZ, Sharon Byrne, the chair of the IBA, said “people are desperate,” with fears that the country’s independent sector will be “wiped out”. She added the move is a “tragedy” for the 200 remaining small shops in Ireland that survived the recession but are now rendered “unviable”.
She added: “Already since the Budget measures were announced, I have spoken to a number of small independent bookmakers, some of whom have been in business for more than 40 years, who now believe they have no option but to let their staff go and close their doors.
“It is extremely disappointing that 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.
“As an industry we will continue to search for a way to address this regressive tax on jobs and businesses.”
There is hope for the industry, with the Irish Government having reversed a rise in gambling tax back in 2006 after just a month when the effects of the decision became apparent.
Byrne believes the Finance Minister should have followed the conclusions of last year’s Department of Finance report, which advocated a gross profit tax used in many other countries.
The IBA said in a statement: “The instigators of this retrograde step have failed to either consult with or understand our industry and have shown complete disregard for the holistic nature of this issue by not factoring in the new costs and reducing revenue in the form of declining PRSI, VAT and ultimately turnover tax associated with these closures.
“It also ignores the revenue that will be lost to black market operators who will now thrive in areas where licensed bookmakers have to close.”
The current tax rate, which was introduced in 2015, is on top of standard business charges. Irish gambling companies are unable to recover VAT on purchases, while turnover is impacted by the ban on FOBTs in betting shops.
The Government plans to use the tax hike to increase funding for problem gambling treatment and the racing industry.
Horse Racing Ireland welcomed the Budget announcement, suggesting the betting industry was exaggerating its impact.
“The tax rate has been the same for the last ten years but there has still been a reduction in the number of betting shops,” HRI chief executive Brian Kavanagh said. “I think that has been a consequence of the competitive pressures the betting industry faces as opposed to anything to do with taxation or picture charges.
“The rate is a lower rate of tax than applies in other jurisdictions. Upwards of 85% of turnover in the country is generated by three multinational companies, so that’s a feature of the market as well.”
(Photo: Wikimedia Commons)