This article was originally published in World Online Gambing Law Report,
9(12), December 2010.

The Irish Minister for Finance, Brian Lenihan TD, announced on 7 December 2010 in his 2011 Budget speech that he was going to make the necessary arrangements to ensure that bets placed on the Internet by domestic "punters" are subject to the same level of betting duty as applies in high street betting shops. Betting duty in Ireland at present stands at 1%. To date, betting duty has only applied to bets placed in betting shops by customers located in Ireland. Betting tax did not apply to bets placed by Irish people either online or over the telephone with offshore entities. That is about to change.

The Government intends to include provisions in the Finance Bill and to revise the Irish Betting Act 1931 to ensure that all bookmakers taking bets from Ireland will pay 1% betting duty on those bets in the same way that betting shops currently do. Betting Exchanges will also be subject to tax under the new arrangements but the calculation of the tax will differ from that applying to bookmakers.

Up until now, one of the advantages enjoyed by online gambling websites was that they were exempt from betting duty in Ireland. This meant that if someone wanted to put a bet of a few Euro on a race, then in theory it would cost them less to place the bet on the Internet than in their local bookmakers, although in practice the bookmakers absorbed the 1% levy and did not require the customer to pay the tax. While Boylesports and Paddy Power are two of Ireland's online success stories, smaller Irish independent bookmakers without an online presence were losing out to not only their larger Irish rivals but also to foreign online bookmakers located offshore who were exempt from the betting tax.

It is argued that by introducing an online betting duty at the same rate as is currently paid in bookmakers throughout the country, the Government is helping to safeguard the Irish independent bookmaking industry and create a level playing field for all concerning the 1% levy on bets whether placed online or offline.

The introduction of the measure is also seen as a lifeline to Horse Racing Ireland (HRI) which has seen their budget slashed in the last two years, as the industry suffers a general downturn which has resulted in large drops in vital areas such as ownership, prize money and numbers of horses in training. Having peaked at €76 million during the Celtic Tiger, the Horse and Greyhound Fund budget dropped to €59 million in 2010. Of that figure, betting tax only contributed €31 million. The remaining €28 million then had to be added to the fund directly by the Exchequer. It was reported that the HRI were very much in favour of bringing Internet and telephone into the tax net which they hoped in turn would see the increased tax revenue flow into HRI in an effort to plug the gap brought about by the decrease in funding.

This extension of the tax regime to online and telephone operators is hardly surprising given that both the Taoiseach Brian Cowen (the Irish Prime Minister) and the Minister for Finance in the past year made no secret of the fact that online betting would be taxed in an effort to boost the State's coffers. The Government expects that the additional tax could eventually generate as much as €20m a year for the Exchequer depending on the prevailing market conditions.

However, many operators that deliver online and telephone betting services are based offshore and trade through foreign registered companies so it will be interesting to see how this tax is applied and collected. It is unclear at this stage as to whether the duty will apply only to bookmakers with an Irish physical presence or whether it will apply to all bookmakers irrespective of where they are based, provided they take bets online or by telephone from customers located in Ireland. The detail of the Finance Bill should clarify that point. However, if this measure is to work, it will have to be applied fairly in order to avoid operators who have based their Internet operations in Ireland (and consequently brought employment to the country) bearing the brunt of the tax. However, the Minister for Finance seems alive to this issue from his previous comments on the subject.

The Minister in his Budget speech also made reference to the work being conducted by the Department of Justice, Equality and Law Reform on a "proper licensing regime" for gambling operators in Ireland. Unfortunately, the Minister made no comment in terms of whether a report or draft legislation on the reform of the gambling sector was going to be published in the near future. The introduction of a licensing regime will take some time. Draft legislation must be prepared, debated, amended and approved by the Oireachtas (Irish Parliament). It may be that, because of this, it was decided to deal separately with the extension of betting duty to offshore bets from Irish people to achieve a swift introduction of the taxation measure and an influx of betting tax. In essence, this move by the Minister is more about generating increased tax revenue than about reform of the gambling sector. It is hoped that real reform will soon follow. Indeed real reform may not be too far behind given that is has been reported that the Irish Development Authority (IDA) are keen to put in place a proper licensing regime to cover betting exchanges such as Betfair and Betdaq.

The tone of the Budget indicates that the Government is aware of the job aspects of the betting industry in Ireland and in time this might lead to other reforms that could be positive for the sector.

The details of the application of betting duty to offshore operators taking bets from Ireland will be contained in the Finance Bill which should be published in January or February 2011.

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

December 2010.