Reform of Irish Gambling laws Submission by Irish Bookmakers Association ( IBA ) to The Casino Gaming Control Section Department of Justice, Equality and Law Reform September 2009
CONTENTS A. INTRODUCTION B. FUNDAMENTAL PRINCIPLES C. IBA OPERATIONAL POLICIES D. CONTRIBUTION OF THE RETAIL BETTING SECTOR TO THE IRISH ECONOMY E. PROPOSED LEGAL AND ORGANISATIONAL FRAMEWORK OF NEW GAMBLING CODE 1. Repeal of Existing Gambling Legislation 2. New Gambling Architecture: Primary and Secondary Legislation 3. Creating a Level Playing Field 3.1. Restrictions in relation to the Opening Hours of Licensed Betting Shops 3.2. Range of products and services which bookmakers are permitted to provide to customers in licensed betting shops 3.3. The use of technology in licensed betting offices 3.4. Annual renewal of licences 4. Taxation of Gambling
A. INTRODUCTION 1. The IBA welcomes the decision of the Department of Justice, Equality and Law Reform (the "DJELR") to undertake a comprehensive review of Irish gambling laws, and not to limit the scope of the reform to sectors of the gambling industry which are currently unregulated. 2. The task of repealing disparate pieces of legislation, which date back as far as the 1858 Act for the Suppression of Betting Houses, and replacing them with a single code which establishes an effective legal and organisational framework for the regulation of all forms of gambling activity (including both land-based and online gambling activities), is a challenging endeavour. The IBA commends the Casino Gaming Control Section ("CGGS") on the groundwork which it has completed to date in shaping the parameters of the reform agenda and in liaising with industry operators and other regulators to identify the issues which should form part of its review. 3. The review of Irish gambling laws by the CGSC is well timed from the point of view of IBA members. Licensed betting shops are finding it increasingly difficult to run their businesses on a profitable basis, both due to the economic downturn and to increasing competition from telephone, mobile and online operators, who have been able sell their products to Irish customers free from regulation and without liability to Irish tax. From a legal point of view, the principal difficulty faced by IBA members is that the existing outdated regulatory regime applicable to licensed bookmaking premises, established by the Betting Act, 1931 (the "1931 Act"), prohibits licensed bookmakers from adapting their business models in order to respond to customer demand. 4. The following submission outlines the key principles and policy objectives which the IBA believes should underpin the proposed new gambling legislation.
B. FUNDAMENTAL PRINCIPLES 1. The regulation of, and licensing requirements for, different gambling activities, including casino and arcade gaming, betting, lotteries and bingo, will each require specific treatment in the proposed new gambling legislation. However, the primary objective in regulating each of these forms of gambling activity will be the same. Borrowing the wording from Section 1 of the UK Gambling Act, 2005, the purpose to be achieved by the new gambling code should be: 1.1. To prevent gambling from being a source of crime or disorder, or being associated with crime or disorder, or being used to support crime; 1.2. To ensure that gambling is conducted in a fair and open way; and 1.3. To protect children and other vulnerable persons from being harmed or exploited by gambling. 2. The IBA submits that, similar to the UK Gambling Act, 2005, these objectives should be given a statutory basis in the new gambling code. Furthermore, they should be the point of reference in determining the appropriate regulatory rules and licensing requirements applicable to each form of gambling activity.
C. IBA OPERATIONAL POLICIES 1. The IBA submits that the objectives of keeping gambling free from crime, ensuring that gambling is conducted in a fair and open way and ensuring that young persons and vulnerable people are not harmed or exploited by gambling, will be best realised by placing positive obligations on gambling operators to provide their services in a manner which is socially responsible. 2. The IBA already actively promotes social responsibility among its members, and has voluntarily implemented a number of initiatives which are designed to promote responsible attitudes to gambling, both among persons participating in gambling activities, and persons working in the gambling industry. 3. Notably, the IBA has formed an Irish branch of GamCare, which is an internationally recognised charity, registered in the UK, and active in promoting social responsibility in the gambling sector. Through a strong working relationship with GamCare UK, the IBA has for several years: (i) (ii) (iii) (iv) Operated and financed a freephone telephone service which offers Irish customers direct and free access to GamCare counsellors; Made available and funded, a free-of-charge, face-to-face counselling service for customers requiring same; Provided GamCare literature to its Members, which is displayed prominently on Members premises (copies of this literature is included in Appendix 1 to this Submission); and Provided regular training sessions to Members to equip them with the skills necessary to identify and assist persons susceptible to problem gambling behaviour. More recently, the IBA has, through its Members, initiated a poster campaign called "Look 21" to deter young people from attempting to access betting products.
D. CONTRIBUTION OF THE RETAIL BETTING SECTOR TO THE IRISH ECONOMY 1. The IBA is the largest representative body of licensed betting shops in Ireland. IBA members comprise a mix of independent bookmakers and major operators (including Ladbrokes, William Hill, Boylesports, Celtic Bookmakers, Hacketts Bookmakers and Bruce Betting). The IBA currently represents approximately 750 of the estimated 1,175 licensed betting shops in Ireland. 2. It is estimated that on average, each licensed betting office in Ireland employs [five] staff, either on a full-time or part-time basis. Based on this average, approximately 6,000 people are employed in the estimated 1,178 licensed betting offices in Ireland, which in percentage terms translates to approximately 0.3% of total employment (or 0.6% total private sector employment). 3. Taking into account the above employment figures, it is estimated that Irish licensed betting offices generate annually the following exchequer revenue: Betting Tax (levied at 1%) 35,250,000 PAYE/PRSI 23,500,000 VAT 23,500,000 Rates 8,812,500 Corporation Tax 13,218,750 Total 104,281,250 4. The continued contribution of Ireland's retail betting industry to the Irish economy will be largely influenced by the content of the new gambling code and the taxation of gambling activities once that code is introduced. Unless licensed betting shops are permitted under new legislation to use forms of technology which have revolutionised the betting (and wider gambling) industry, then many outlets, particularly those run by independent bookmakers, will be forced to close.
E. PROPOSED LEGAL AND ORGANISATIONAL FRAMEWORK OF NEW GAMBLING CODE 1. Repeal of Existing Gambling Legislation The IBA submits that to effectively reform Irish gambling laws, all existing gambling legislation should be repealed in its entirety. In the case of retail betting, this will include the repeal of the 1853 Act for the Suppression of Betting Houses, the Betting Act, 1931 and all subsequent amending legislation. Although the taxation of gambling does not fall within the remit of the CGSC review, the IBA submits that the repeal of existing gambling legislation should include the repeal of all Finance Act provisions which deal with the taxation of gambling activities. Notably, the IBA has recently set out in detail its proposals in relation to the taxation of betting activities in a submission to the Department of Finance in advance of the 2010 Budget, a copy of which is included in Appendix 2 to this Submission. 2. New Gambling Architecture: Primary and Secondary Legislation 2.1. The existing disparate legislative enactments on gambling should be replaced with a single comprehensive statute, similar to the model provided by the UK Gambling Act, 2005, which: 2.1.1. Puts the policy objectives of gambling regulation on a statutory footing; 2.1.2. Places a positive obligation on all gambling operators, including both landbased and online operators, to implement social responsibility policies as part and parcel of providing gambling services to customers; 2.1.3. Establishes a licensing system to regulate all forms of gambling activity, including remote gambling, and which sets out the licensing requirements for different forms of gambling activities; 2.1.4. Establishes precisely what activities are permitted by each form of licence; 2.1.5. Contains clear and comprehensive definitions of key concepts, such as "gambling" and "remote gambling", "betting", "gaming", "lottery", "casino" and "premises"; 2.1.6. Creates a level playing field for all gambling operators (including land-based and online operators), subject to appropriate licences being obtained; 2.1.7. Appoints an appropriate regulator and equips that regulator with the necessary investigative and enforcement powers to ensure the effective implementation of the new gambling code. 2.2. To ensure that the new gambling code is flexible and responsive, matters such as licence application procedures, licence fee amounts and technical standards applicable to gambling equipment and premises, should be established by way of secondary legislation.
3. Creating a Level Playing Field Under the existing regulatory and taxation regime, IBA members are impeded from modernising and updating their business models to respond to the demands of modern customers. The IBA submits that the new gambling code should remove these impediments which place licensed betting shops at a competitive disadvantage vis-a-vis their betting industry counterparts offering telephone, mobile and online betting services. In particular, the reform of Irish gambling laws should not repeat the following features of the 1931 Act: 3.1. Restrictions in relation to the Opening Hours of Licensed Betting Shops In sharp contrast to telephone, mobile and online betting facilities, which are available to customers on a 24-hour basis, licensed betting shops are severely restricted in relation to the hours during which they can keep their doors open for business. Section 21 of the 1931 Act (as amended by Section 85 of the Finance Act, 1988 and Section 66 of the Finance Act, 2007) requires licensed betting shops to close by 6.30 p.m. between 1 September and 31 March each year, except on days on which an Irish race meeting is taking place at an authorised racecourse after that time. The IBA submits that restrictions on the hours of trade imposed by the Betting Act, 1931 should be removed or, at a minimum, relaxed, such that licensed betting shops are permitted to stay open between 7:00 a.m. and 10:00 p.m. on Wednesdays, Thursdays and Fridays at all times of the year (and not just from 1 April to 31 August of each year). 3.2. Range of products and services which bookmakers are permitted to provide to customers in licensed betting shops Section 19 of the 1931 Act prevents a bookmaker from carrying on any business, other than bookmaking, in his or her licensed betting shop. Moreover, only the registered proprietor of a licensed betting shop premises can carry on business in that shop. Although this prohibition was relaxed by Section 18 of the Horse and Greyhound Racing Act, 2001, which expressly allows bookmakers to sell racing journals, nonalcoholic beverages and "packaged" confectionary to customers and to accept totaliser bets, the existing legislation does not allow bookmakers to diversify the range of products and services which they provide. The IBA submits that any restrictions on trade in relation to licensed betting offices in the new gambling code should be justifiable by reference to the primary regulatory
objectives, which are set out in Section B (Fundamental Principles) above. If restrictions can not be justified by reference to these fundamental principles, then they should not be imposed. 3.3. The use of technology in licensed betting offices The IBA endorses Recommendation No. 8 of the Report on Regulating Gaming in Ireland prepared by the Casino Committee, which provides that gaming and betting be treated as two completely separate types of gambling activity [ ] in any regulatory arrangement and which expressly states that there should be no betting of any kind permitted on or in any licensed gaming premises. Likewise, there should be no gaming activity of any kind permitted on or in any betting or bookmakers premises. Furthermore, the IBA welcomes the statement by the Casino Committee that it is not opposed to the introduction of new technology into betting or bookmaker's offices provided that the service being provided utilising such technology is exclusively that of betting. However, the IBA contends that the Casino Gaming Control Section should not attach weight to Recommendation No. 9 of the Report, which states that contemporary fixed odds betting terminals (FOBTs) are to be treated as gaming machines. Whereas the Casino Committee points to the difficulty of classifying different forms of gambling activity (which it refers to as a definitional quagmire ), and suggests that defining distinct categories of gambling activity (i.e. gaming, betting, casino, gaming arcade, gaming machine etc.) requires further indepth consideration, the Report goes on to make a recommendation in relation to the classification of fixed odds betting terminals without any such indepth consideration. The IBA submits that before formulating policy proposals in relation to the use of technology, such as Betting Terminals in licensed betting offices, the Casino Gaming Control Section must first consider and analyse indepth and in detail the definitions of distinct categories of gambling activity, as suggested by the Casino Committee Report. In relation to that consideration and analysis, the IBA strongly contends that the Casino Gaming Control Section distinguish between Betting Terminals and Traditional Gaming Machines. The IBA submits that the key definitional and functional difference between Betting Terminals and Traditional Gaming Machines is that in the case of Traditional Gaming Machines, the customer is participating in or playing a game, the result or outcome of which is determined by the actions of the player and by the gaming machine itself, but in the case of Betting Terminals, the customer is a spectator who is simply speculating on the result or outcome of events which are graphically displayed on the Betting Terminal, but which are determined by a random number generator, which is located off-site, and over which the bookmaker has no control.
Notwithstanding the definitional and functional difference between Betting Terminals and Traditional Gaming Machines, the IBA acknowledges that the introduction of Betting Terminals into betting shops could raise some policy and social responsibility issues. However, the IBA submits that these policy and social responsibility issues are no different to the policy and social responsibility issues at play in relation to existing betting opportunities and the regulation of other forms of gambling activity. As outlined above, the IBA suggests that social responsibility obligations applicable to all gambling operators, and in relation to all forms of gambling activity, be put on a statutory footing. A prohibitionist approach to Betting Terminals would be counter productive and serve to reflect the unworkable 1956 Act approach of banning activity in contrast to the 2009 approach which seeks to better regulate gambling activity. In 2007, the IBA appointed a Sub-Committee to consider best practice principles in relation to the operation of Betting Terminals in licensed betting offices in a manner which is socially responsible. The Sub-Committee, working in consultation with GamCare, drew up a draft Code of Practice, a copy of which is included at Appendix 3 of this submission. Although that Code was not finalised or implemented, it sets out clearly the operational and content limitations which the IBA believes should be applied in relation to Betting Terminals. The IBA asks that the Casino Gaming Control Section have regard to this draft Code of Practice when it is formulating its public policy proposals in relation to the use of technology, including Betting Terminals, in licensed betting shops. 3.4. Annual renewal of licences The IBA supports the imposition of stringent licensing requirements in relation to firsttime licence applications. However, the IBA submits that the current licensing system, which requires bookmakers to apply afresh for bookmaking licences and on an annual basis, at a significant cost to them, is unjustifiably onerous and is a clog on the time of the courts. In addition, the formal annual application adds an unnecessary layer of cost. The IBA submits that the new gambling code should provide for a licence renewal procedure which is similar to that applicable to liquor licensing renewals (introduced by the Courts (No. 2) Act, 1986). The IBA suggests that it should be possible to renew licences annually by submitting an application form to the appropriate regulatory authority and paying the applicable licence fee, except where a notice of objection to renewal is received from a competent objector, in which case the licensed bookmaker will be required to satisfy a more onerous list of proofs to secure licence renewal.
4. Taxation of Gambling The taxation of betting (and gambling activities generally) will be of paramount importance to the effectiveness of the new gambling regulatory regime, both from the point of view of industry operators and from the point of view of maximising the fiscal potential of the gambling industry for the exchequer. The current betting taxation regime, whereby betting duty is based on turnover (and not profit) is unsustainable from the point of view of licensed betting shops. The IBA acknowledges that the taxation of gambling does not come within the remit of the CGSC. However, the IBA strongly contends that as part of the review of gambling laws, a separate commission on taxation should be established alongside the CGSC to examine the taxation of gambling in conjunction with regulatory reform. As noted above, the IBA has recently set out in detail its proposals in relation to the taxation of betting activities in a submission to the Department of Finance in advance of the 2010 Budget (see Appendix 2). An illustrative example of the contribution made by an average licensed betting shop to the Exchequer is set out at page 4 of that submission.
Appendix 1 GamCare Interactive If you are lucky enough to look younger than you are, please do not be offended if we Ask for ID. Persons under the age of 18 are not permitted on these premises. In an effort to prevent this, it is our policy to ask all customers who look under the age of 21 for ID. Please gamble responsibly and have fun. 18 Sponsored by the Irish Bookmakers Association Gamcare: 1800 246 139 There is help and Support available Gamcare services provide emotional support, advice, information and referral for people experiencing problems with their gambling, and family and friends affected by gambling. 1800 246 139 Call the Help-Line and speak to a trained Advisor for counselling support, information and advice. 8am - midnight, 7 days a week. Sponsored by the Irish Bookmakers Association
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Appendix 2 2010 Budget Proposal PROTECTING JOBS, CREATING OPPORTUNITY Pre Budget Submission from Ireland s Betting Industry October 2009
EXECUTIVE SUMMARY The Irish betting industry is currently generating approximately 6,000 jobs. This employment is spread across Ireland, making an important contribution to communities in all parts of the country. The total contribution being made to national and local taxation by licensed betting offices is approximately 104 million per annum. This figure, coupled with the employment numbers, makes clear that the betting sector is making a real, positive impact on Ireland s economy, especially at this time of rising unemployment and diminishing taxation returns. However, the current downturn has impacted significantly on the betting sector. This downturn has resulted in almost 350 jobs losses, the closure of 66 licensed betting offices in only 9 months and a sharp reduction in betting duties. Earlier this year, the betting industry welcomed the decision of Government not to proceed with the proposed increase of betting duty to 2% of turnover. If this increase had been put in place, the impact on the Irish betting industry would have been disastrous. However, the fact remains that the current turnover tax is not appropriate for an industry, like betting, that cannot control its output. Ireland s approach to betting duty means that the betting industry must pay tax on turnover regardless of making a profit or not, placing the domestic betting industry at a severe disadvantage when viewed alongside our competitors. Furthermore, when all taxation is considered the average betting shop faces an effective, and highly penal, tax rate of approximately 98% (see The Average Licensed Betting Office, pg 4). The 1% betting duty is, therefore, having a significant and detrimental impact on a sector of the betting industry that is generating significant employment and considerable revenue for the exchequer. At a time when the domestic betting industry is in steep decline and already facing serious competition from forms of betting that do not come within the Irish betting tax net such as the internet, phones and mobile platforms we need a tax structure that will both protect an industry that is providing thousands of jobs and substantial revenue for this country whilst also attracting inward investment and job creation from international betting companies. This submission, put forward by the Irish Bookmakers Association (IBA), sets out the key reforms that we believe should be prioritised by Government to protect and promote employment, safeguard the contribution made to the exchequer by the betting industry, and encourage crime free, socially responsible, regulated environments for adults to enjoy gambling activities. Our reforms would also allow the Government to capitalise on new technological developments in betting, generating significant new jobs and positioning Ireland as a centre of international betting excellence. These core reforms concern: 1. Legislation and Opening Hours
o Reform opening hours to allow bookmaking outlets trade until 10pm each Wednesday, Thursday and Friday throughout the winter with immediate effect o Review the archaic legislation governing betting in Ireland 2. Taxation o Establish a Commission on Betting Industry Taxation to urgently examine the matter of betting sector taxation involving representatives from the industry 3. Horse Racing Ireland (HRI), Facilities, Race Schedules o Reform HRI funding to make savings, introduce efficiencies, and ensure that the burden of funding HRI is shared fairly and not carried by the off course retail betting market alone o Reduce the level of prize monies which are excessive o Make better use of facilities and improve race scheduling so that race meetings take place all year round and on winter evenings, adding considerably to turnover and the benefit to the exchequer o Ensure that the HRI Board includes a representative of the off-course betting industry which funds HRI and should have input into its activities 4. Smart Economy o Undertake reforms to position Ireland as a global centre of excellence for the betting industry With these sensible and straightforward reforms not only will the current contribution made by betting to the Irish exchequer be preserved, but the sector can also grow for the future. By working in partnership with the Government and with our key stakeholders, and progressing with these modest yet important reforms, Ireland can become a centre of excellence for our sector while generating extra employment and tax revenues. IRELAND S BETTING INDUSTRY REAL CONTRIBUTIONS, PRESENT CHALLENGES Ireland s betting industry makes a very significant contribution to the economy at both a national and local level. There are approximately 1,175 licensed betting offices in Ireland. On average it is estimated that each office employs five people on a full-time or part-time basis. This translates into total employment of around 6,000 full-time or part-time jobs. This is equivalent to almost 0.3% of total employment in the economy, and 0.6% of total private service sector employment. The Average Licensed Betting Office: As an illustrative example, the average licensed betting office makes the following contribution to the national exchequer and the local authority in which it is located: Turnover 3,000,000
Gross Profit (@10%) 300,000 Net Profit (@3%) 90,000 Betting Tax (@ 1%) 30,000 PAYE/PRSI 20,000 VAT 20,000 Rates 7,500 Corporation Tax 11,250 Total Taxation 88,750 Taxation as a % of profit 98.6% Apart from the direct contribution made by the betting industry to the Irish economy in terms of employment, taxes paid by employees, taxation paid by the industry itself, VAT and betting tax collected, commercial rates, and the income multiplier effect, the indigenous and regionally dispersed nature of the industry is very significant. Jim Power, Economist (2008) The National and Local Taxation Contribution: Moving from the local to the national picture, the total contribution of licensed betting offices to the national and local economy is estimated as follows: Employment 6,000 jobs Betting Tax (@ 1%) 35,250,000 PAYE/PRSI 23,500,000 VAT 23,500,000 Rates 8,812,500 Corporation Tax 13,218,750 Total Taxation 104,281,250 The tax system for the industry is therefore badly in need of review. However, any such review is likely to come too late to save many independent operators; expect the number of shops in Ireland to start to fall in H1 2009 from its current peak of 1,250. David Jennings, Davy Stockbrokers It should also be noted that Ireland s betting industry also supports Gamcare Ireland which offers free phone and face-to-face counselling services for persons suffering as a result of problem gambling. Our members participate in regular training sessions, display Gamcare literature prominently in their shops, and have trained staff that can identify and assist problem gamblers and provide information and self exclusion forms where necessary. Notwithstanding these substantial economic and social contributions, it remains the fact that these are very challenging times for Irish betting. As with all businesses in Ireland the sector has undergone a painful process of adjustment to today s new economic reality. The overall share of the national betting market which is captured by licensed betting offices has declined very significantly in recent years and continues to fall. Correspondingly, betting duty is declining, and dropped by almost 3 million in 2008 ( 33.6 million) compared with 2007 ( 36.5 million). Projections for 2009 (c. 30 million) show a continued decline in this duty. In the last nine months the retail betting sector has seen almost 350 jobs losses as a result of the closure of 66 licensed betting offices. We the representatives of the major contributors to Ireland s betting industry
strongly believe that our sector can be strengthened. The betting industry offers the Government the opportunity to create employment, increase the benefits to the exchequer, and make a real contribution to the development of a smart economy in Ireland. Whilst the trading situation for all businesses is challenging at present, this is also an excellent time for positive change and reform. With the right approach, and by progressing with a number of sensible and straightforward reforms, Ireland s betting industry can make a greater contribution. THE ECONOMIC POTENTIAL OF REFORM Under Irish betting legislation, the summer betting period runs from April 1 st to August 31 st and the winter period runs from September 1 st to March 31 st. During both the summer and winter period there are some days on which no Irish racing takes place. During the winter period betting shop opening hours are also restricted. Both of these factors impact negatively on the betting sector but with reform the full economic potential of the betting industry could be realised. Summer: During the 2009 summer period there were 18 days on which no Irish race meeting was held. There were 88 days on which one Irish race meeting took place. There were a further 44 days on which two Irish race meetings took place. The betting industry estimates that each day an Irish race meeting takes place is worth approximately 1.6 million to our industry in terms of turnover. However, where a second race meeting is held on the same day there is no noticeable increase in revenue. Winter: During the 2008/09 winter period there were 79 days with no Irish race meeting taking place. On a further 76 days one Irish race meeting was scheduled. On another 24 days two Irish race meetings were held. The betting industry estimates that each winter Irish race meeting is worth approximately 1.8 million to the industry in terms of turnover. On the days when a second race meeting is held turnover increases by approximately 400,000. Therefore, holding a second race on the same day in the summer makes no impact on turnover, and in the winter a second race only realises only a small turnover increase. This shows that in order to maximise turnover and consequently taxation due to the exchequer the race schedule should be organised so that one race takes place on the maximum number of days throughout the year. Scheduling two races or more on any day, and leaving a large number of days with no race taking place, should be strenuously avoided.
Opening hours: During the winter period licensed betting offices can only remain open on a Wednesday, Thursday or Friday evening when an Irish race meeting is taking place. Otherwise, these outlets must close at 6.30pm. During the 2008/09 winter period, licensed betting offices were open for approximately 18 Wednesday, Thursday or Friday evenings between September 1 st and March 31 st. Of the remaining Wednesday, Thursday and Friday evenings during this period (approximately 65 evenings) licensed betting offices were closed. Race meetings on winter evenings make a significant contribution to the betting industry. Additional turnover of approximately 2 million is generated during winter evening openings and this increases to approximately 3.2 million when an Irish race takes place on the evening in question. The Reform Dividend Employment and Exchequer Returns At present there are currently approximately 100 days per annum with no Irish race taking place. By improving the scheduling of race meetings and having one race meeting on each day betting industry turnover would increase by approximately 160 million resulting in additional duty to the exchequer of 1.6 million. There are 65 winter evening opportunities for racing which if utilised could result in additional turnover to the industry of approximately 91 million (with no Irish race meetings) and up to approximately 145 million if the track at Dundalk was utilised on a further 30 winter evenings. Scheduling more Irish racing on winter evenings could, therefore, result in additional betting duties to the exchequer of up to 1.45 million. Furthermore, by extending opening hours the seasonal reduction in job numbers which occurs in retail betting shops at the end of the summer would no longer be necessary and employment would be bolstered all year round. jobs each) Potential Additional Economic Contributions from Reform Increased Turnover 305,000,000 Extra Betting Tax (@ 1%) 3,050,000 More Employment An estimated 1,000 extra part time (approximately 14 hours per week
RECOMMENDATIONS TO REALISE THE FULL POTENTIAL OF IRISH BETTING Whilst the betting industry makes a significant contribution to the national exchequer and local economy, the challenges faced by the sector are considerable. To meet these challenges, and to build a stronger sector for the future creating employment and generating a bigger return for the exchequer, we are proposing four reforms concerning: 1. Legislation and Opening Hours 2. Taxation 3. Horse Racing Ireland (HRI), Facilities, Race Schedules 4. Smart Economy We believe that our proposals are constructive and, if implemented, will greatly assist the sector through the current downturn and more significantly increase the return to the exchequer for the future. 1. Legislation and Opening Hours The legislation which governs the Irish betting industry is archaic and out-of-date. It takes no account of the more recent technological developments which have revolutionised our industry. For example, the regulations governing the opening hours of licensed betting offices states that these outlets must close by 6.30pm from September 1 st to March 31 st unless there is an Irish race running after that time. By contrast, online operators trade 24 hours a day, 7 days a week. These regulations were devised long before the emergence of online and telephonebased betting, giving them a competitive advantage over licensed betting offices, and also prevent licensed betting offices from offering such a menu of computerised betting events and products similar to what is available online. Our solutions Reform opening hours: The Irish betting industry is seeking an urgent review of the opening hours of bookmaking outlets to allow outlets trade until 10pm each Wednesday, Thursday and Friday throughout the winter with immediate effect. Bookmaking outlets are already open until this time during the summer months. We estimate that this modest reform coupled with increased winter racing at Dundalk could generate an additional 145 million turnover increasing betting taxation for the exchequer by 1.45 million (see The Reform Dividend Employment and Exchequer Returns, pg 7). Review legislation: The Irish betting industry is seeking a review of the legislation governing betting which should provide for new betting technologies in shops where they can be controlled, monitored and benefit from the presence of fully trained staff. This would allow betting shops to compete with other operators, many of whom are not based in Ireland or making a significant employment contribution to the State. Social responsibility: We also propose that social responsibility practices should be
mandatory and that all related sectors should contribute to participate and promote services such as those provided by Gamcare Ireland. 2. Taxation The Irish betting industry welcomes the fact that the doubling of betting duty to 2%, as proposed earlier in the year, was not progressed by the Government at that time. It remains the case, however, that the current 1% betting duty is having a serious impact on the sector as a whole. This duty is placing significant pressure on licensed betting offices, which incur high fixed costs and which are significant employers across the country. Furthermore, when all taxation is considered the average betting shop already faces an effective, and highly penal, tax rate of approximately 98% (see The Average Licensed Betting Office, pg 4). Licensed betting offices are disadvantaged when compared with other businesses as they may not reclaim VAT on business expenses unlike other enterprises. Therefore all their expenses are 21.5% higher. The IBA believe that the normal VAT requirements should apply to the bookmaking sector as with all other businesses in the State. Licensed betting offices also operate at a competitive disadvantage when compared with other betting media, such as online, mobile and telephone, which are not subject to betting tax. There has been significant customer slippage away from conventional betting to online formats, as evidenced by the sharp decline in the overall share of the national betting market held by licensed betting offices over the past decade. Betting duty applied as a turnover tax is unique in Europe, is contributing to the closure of licensed betting offices, and gives substantial taxation advantages to offshore competitors. Put simply, betting duty is an unfair tax on only one segment of the betting sector, ironically a segment that generates significant employment across the country. In terms of online and telephone betting, it must be recognised that these elements of the betting industry evolve on a daily basis, requiring considerable ongoing research and development costs from the companies involved. Those members of the betting industry that are involved in online and telephone betting compete in a tough international market for business. We do not believe that the online and telephone betting business of the 2 Irish companies providing employment in Ireland represents a significant taxation opportunity for the Government, but rather that a new approach to taxation throughout the sector would have the effect of attracting overseas investment into Ireland, expanding the jobs that are created by the betting industry and increasing the dividend to the exchequer as a result. A new approach to the issue of taxation of the betting industry in Ireland is, therefore, now required.
Our solution A Commission on Betting Industry Taxation: The betting industry is calling on the Government to establish a Commission on Betting Industry Taxation involving representatives from the betting industry to urgently examine the matter of taxation reform. Such a new approach represents a considerable opportunity for the Government at this time. Adopting a fiscally prudent approach to taxation which sustains employment in Ireland by offering a similar taxation to that which is in place in other countries, whilst also attracting international players in the betting industry to Ireland, will expand the industry and increase the return to the exchequer. 3. Horse Racing Ireland (HRI), Facilities, Race Schedules The Irish horse racing industry is an important contributor to the exchequer and is vital for Ireland s betting industry. However, as the major stakeholders and contributors to the exchequer the off course betting industry has little or no say with the HRI in terms of making improvements and delivering additional revenues to the exchequer. We believe that reforms are required urgently in terms of HRI funding, the level of prize monies, the use of facilities, and the scheduling of race schedules which would benefit the sector, and exchequer, considerably. In terms of HRI reform, the level of funding given to HRI is six times the level received by the UK horse racing industry from the UK bookmaking sector. Total direct grants from the Department of Finance to the Horse and Greyhound Racing Fund from 2001 to 2008 totalled 545 million. There is no compelling rationale for why this should be the case. This situation is adding unnecessary pressure to the betting industry in terms of funding demands for HRI. In addition, the level of prize monies available in Ireland and set by HRI is excessive. For example, on July 1 st 2009 the prize money available at Fairyhouse was 157,000, almost the same amount as the total for the five UK-based meetings that took place that day alone. Clearly, however, the motivation to race horses at these meetings is not dictated by the prize monies available. Fixtures in the UK, offering only 30% of the total prize monies available in Ireland, have attracted the majority of their total runners from Ireland. Our solutions Reform of HRI funding: The betting industry believes that the level of funding allocated to HRI should be examined. The recommendation of the Special Group on Public Service Numbers and Expenditure Programmes has proposed reducing funding to the Horse and Greyhound Fund by 16.6 million. The betting industry sees the potential for more significant cuts to be made as part of an ongoing programme of reform. As long as these very significant subventions are awarded to HRI, without any real focus on reform and outputs, there will be little incentive to HRI to improve their service to the industry or the consumer. Reform of prize monies: The motivation to race horses at these meetings is not dictated by the prize monies available. The betting industry believes that the current level of prize monies needs to be reviewed.
Use of Facilities: Ireland has better facilities today than at any time in the past, but many are under-utilised. For example, Dundalk (redeveloped at a cost of 35 million) boasts an exceptional facility. However, Dundalk is the only all weather track that does not race in the winter. Greater use of Dundalk throughout the year but especially over the winter months would develop the offering to consumers from the bookmaking industry and at licensed betting offices, supporting employment and revenues to the exchequer. Race scheduling: A serious evaluation of race scheduling should take place, with a view to ensuring that there is a broad spread of consumer-friendly racing fixtures available, on as many days as possible, throughout the year. Ensuring that there is an Irish meeting available on as many days as possible would greatly enhance the offering to consumers and would benefit the industry by promoting Ireland-based events all year round. We estimate that encouraging more winter racing, and improving scheduling so that there is an Irish race meeting taking place almost every day of the year, could yield approximately 305 million in additional revenue per annum for the industry resulting in an extra 3.05 million in betting taxation for the Government (see The Reform Dividend Employment and Exchequer Returns, pg 7). Supporting HRI: The burden of supporting HRI should not fall entirely on the off course retail betting market the responsibility for supporting HRI should be expanded to include online, mobile and phone betting operators. The HRI Board: Finally, as major stakeholders and key contributors to the exchequer the off course betting industry should be represented on the HRI board. 4. Smart Economy The Government has recognised the development of a smart economy as being critical for Ireland s future success. Internationally, the global betting industry is investing significantly in research and development to improve their offering to consumers and to meet consumer demand through new betting media. Given the technological innovations in betting over the past decade the Irish betting industry has also invested in R&D, offering a range of employment opportunities for IT and web developers, programmers and many other IT professionals. The expansion of the betting sector in Ireland, and the positioning of Ireland as a global centre of excellence in betting, presents a huge opportunity to the Government at this time. Two of the leading global players in online betting are Irish companies, but there is the opportunity to generate significant numbers of additional jobs by increasing the number of online betting companies based in Ireland. An examination of the expansion in one of these Irish companies Boylesports illustrates this point. Boylesports based in Dundalk, County Louth also generates significant employment through non-retail betting. Approximately 250 people are employed by Boylesports in this side of the business including online and telephone betting at
present. More than 60% of these employees are involved in highly skilled operations including programming, software development, online applications, and other IT developments. Ireland is already benefitting from the generation of a significant number of jobs from online betting companies that have operations in this country. An outline of this employment includes: Current Jobs provided by Online Gambling Firms located in Ireland Situated in Ireland Currently Employs Sporting Bet 170 Full Tilt 400 Cryptologic 16 BetDaq 110 Paddy Power 632 Boylesports 250 Bruce Betting 50 Total 1628 Now, by undertaking necessary reforms, the Government could position Ireland as a centre of excellence and global leader in the betting industry internationally and generate even more employment in this sector. Our solution Reform: Legislation, regulation and taxation reforms would make Ireland an attractive destination for betting industry investment. We believe that progressing these reforms would make a significant, long-term contribution to the national and local economy through the generation of significant additional employment in the sector. Taking action to make Ireland an attractive location for gaming and gambling investment would support smart economy developments through the employment of additional web developers, computer programmers, IT and computer science graduates. It would also have a knock-on effect in terms of support staff, marketing, and software development. Ireland boasts an educated workforce with specialist skills that can be deployed to develop the country as a centre of excellence for the bookmaking sector. Ireland also has an excellent reputation internationally regarding all aspects of betting and racing. The IDA estimates that almost 1,000 overseas companies have established operations in Ireland. They are a key driver of the economy employing over 135,000 people directly and many more indirectly. Ireland s betting industry is ready and willing to assist the IDA in encouraging overseas bookmaking companies to locate in Ireland. With the appropriate reform, Ireland can compete for significant international investment in our sector.
5. CONCLUSIONS Betting offices are located in towns, cities and villages around the country and are a very important source of employment across Ireland. The direct contribution made by the betting industry to the Irish economy in terms of employment, taxation paid by employees, VAT and betting tax, commercial rates, and the income multiplier effect, is very significant. By way of comparison, employment in the Irish betting industry is equivalent to almost 18% of the employment generated by the major retail bank groups in the Republic of Ireland. The Irish betting industry has a significantly greater coverage across Ireland than the banking industry, with more than 1,100 betting offices compared to 804 branches and 130 sub-offices operated by the major retail banks. These licensed betting offices typically occupy prime real estate locations. In a more difficult economic environment, with considerable office and retail space now becoming vacant, it would not be desirable to have these betting offices shutting down, cutting the contribution to local rates and adding to the excess supply of office and retail space available. In addition to the direct contribution made by the sector, the betting industry also plays a key role in supporting Ireland s successful horse and greyhound breeding and racing industry. For the future, Ireland s betting industry has the potential to generate signficant extra turnover, revenues for the exchequer, and more jobs. To do this we need reform. Betting shops offer a valuable social outlet and activity for many thousands of people across the country. They are well regulated and the sector takes its responsibilities very seriously, offering services for anybody affected by problem gambling with trained staff that can identify and act on any problems that may arise. The Irish Bookmakers Association believes that Ireland s policy makers should now prioritise reforms to create a regulatory and fiscal environment that protects indigenous jobs and a level playing field for the betting industry, maximising the return to the exchequer from our sector. If undertaken, these reforms will expand the contribution that our industry can make in terms of employment and the exchequer to Ireland s economic future.
Appendix 2 Draft Code of practice in relation to the Supply and Use of Fixed Odeds Betting Terminals in Licensed Betting Offices in the Republic of Ireland. Draft Code of Best Practice Governing the Supply And Use of Fixed Odds Betting Terminals In Licensed Betting Offices in the Republic of Ireland 1. INTRODUCTION Issued March 2007 1.1. This Code has been prepared by a sub group of the Irish Bookmakers Association (IBA) in consultation with Gamcare, the charity that assists problem gamblers. 1.2. The IBA and its members wish to help create an environment in which the public enjoy fair and responsible gambling. Accordingly, IBA membership is open only to bookmakers who accept and operate according to the practices put forward in Section Two of this Code and who obtain their Fixed Odds Betting Terminals from approved manufacturers/suppliers. 1.3. Section Three comprises a method of ensuring that manufacturers/suppliers of Fixed Odds Betting Terminals and the products they offer also adhere to socially responsible procedures. (This needs to be discussed with manufacturers) 1.4. By requiring licensed betting offices to comply with the conditions outlined in Section Two and by establishing a standard for operators and manufacturers/suppliers, this Code seeks to ensure that access to the market is available only to those who are prepared to be socially responsible. 1.5. This Code will be reviewed on an annual basis and, where necessary, will be amended to ensure its continued effectiveness. 2. CONDITIONS TO BE COMPLIED WITH BY LICENSED BETTING OFFICES 2.1. Terminal Operation 2.1.1. The maximum number of Fixed Odds Betting Terminals per Licensed Betting Office should not exceed four. 2.1.2. The maximum payout per single transaction should not exceed 500. 2.1.3. The maximum stake per single bet should not exceed 15 per bet. 2.1.4. The maximum stake per transaction on any event should not exceed 100. 2.1.5. In order to prevent potential problem gamblers from chasing losses, the minimum cycle
time between customers inputting money, selecting their bet(s) and settlement should be not less than 30 seconds. When customers are betting from their original stake or from accumulated winnings, the minimum cycle time for this type of transaction should be not less than 20 seconds. Note: This means a minimum cycle time of 30 seconds will apply to the bet immediately following the insertion of cash which changes a zero balance to a positive balance. Thereafter, all bets will be subject to a minimum cycle time that can include thinking time. Cycle time is the time between pressing the Start or Bet button and being able to do so again. 2.1.6. Terminals should only accept some form of ticket/token/voucher which has been purchased at the counter, or money which is credited to the machine from the counter, having been paid for there. 2.1.7. All payouts should be made at the counter. 2.1.8. Odds for each betting event should be clearly displayed on all terminals. Note: This means that either the odds are displayed on the event screen or, when the full list of odds is not shown, via, a show odds facility on the help page. Displaying potential winnings is an acceptable alternative to showing odds. When winnings are displayed, the stake must be declared 2.1.9. There should be an on-screen balance meter allowing customers the option of tracking their winnings/losses per session. It is acceptable for this information to be capable of being obscured if a customer chooses this option. If the obscure facility is available, it should be referred to on the help page. 2.1.10. Customers should have the ability to cash-in at any time following the completion of each betting event, to set limits on the time they bet, and on the amount they wish to spend per session. If an event has more than one stage, the result of each stage must be determined by an independently operated random number generator at the instant the start or bet button is pressed. The ability for customer to set limits means that they must be given the choice of setting a limit when they first approach the FIXED ODDS BETTING TERMINAL. Therefore, a set limits button should be present on the home page. Customers should also be able to access the set limits screen from each event screen, which can occur via the help screen. To ensure a new customer is aware of social responsibility facilities, an idle machine should revert to the home page after 30 seconds of inactivity when there is a zero balance. A warning that reversion to the Home Page de-selects any previously set limits should be displayed. Additionally, customers should be able to set a limit at any time. This can be achieved by installing a set limits button on the help screen that is accessed from the event screen. When the pop-up window appears advising the customer they have reached their limit it should provide the following options: Continue, which will unset the limit and take the customer back to the event, Quit, which will take the customer back to the Home page or print out a voucher, and Reset Limit, which will take the customer back to the Set Limits screen.. 2.1.11. Point of sale promotional material should not encourage excessive gambling. On or offscreen promotional messages must not indicate, suggest or imply that by betting on a FIXED ODDS BETTING TERMINAL the customer will win; that betting on a FIXED ODDS BETTING TERMINAL is a means of getting out of financial difficulty; or that by continuing to bet, a run of losing bets will become winning bets. Such messages should be factual and refer only to permitted events. 2.1.12. All random number events are to be organised independently of the bookmaker. This means that the bookmaker must have no access to the random number event. The FIXED ODDS BETTING TERMINAL software must not influence the outcome of an event. Random numbers cannot be generated within the terminal or elsewhere on the premises but must be sourced from an independent supplier. 2.1.13. IBA members should obtain FIXED ODDS BETTING TERMINAL/FIXED ODDS BETTING TERMINAL products only from manufacturers and suppliers approved by the IBA Sub Group on Fixed Odds Betting Terminals. An up to date list of approved suppliers may be obtained from the IBA.
2.2. Terminal content All FIXED ODDS BETTING TERMINAL content must comply with the following: 2.2.1. Clear help pages should be present on all terminals, including contact information for GamCare and warnings on excessive gambling. Access to help pages to be available at all times by use of button/icon. 2.2.2. Responsible gambling posters should be prominently displayed adjacent to terminals. These posters are available from the IBA. The following bet process must be adhered to: 2.2.4. Customers must make a positive selection, meaning that for each bet placed the customer has to touch the screen or button and that to start each event or stage of an event the customer has to press a bet or start button. The customer must be able to select a specific outcome when placing a bet. 2.2.5. Customers must choose a stake, meaning that even if the customer chooses to repeat his/her bet they must do so by pressing bet button. 2.2.6. Odds must be clearly visible at time of selection 2.2.7. The result of each event must be announced or displayed on terminals
PROTECTING JOBS, CREATING OPPORTUNITY A Pre Budget Submission from Ireland s Betting Industry Irish Bookmakers Association October 2009 1
TABLE OF CONTENTS PAGE EXECUTIVE SUMMARY 3 IRELAND S BETTING INDUSTRY REAL CONTRIBUTIONS, PRESENT CHALLENGES 5 THE ECONOMIC POTENTIAL OF REFORM 7 RECOMMENDATIONS TO REALISE THE FULL POTENTIAL OF IRISH BETTING 9 1. Legislation and Opening Hours 9 2. Taxation 10 3. Horse Racing Ireland (HRI), Facilities, Race Schedules 11 4. Smart Economy 13 CONCLUSIONS 15 2
EXECUTIVE SUMMARY The Irish betting industry is currently generating approximately 6,000 jobs. This employment is spread across Ireland, making an important contribution to communities in all parts of the country. The total contribution being made to national and local taxation by licensed betting offices is approximately 104 million per annum. This figure, coupled with the employment numbers, makes clear that the betting sector is making a real, positive impact on Ireland s economy, especially at this time of rising unemployment and diminishing taxation returns. However, the current downturn has impacted significantly on the betting sector. This downturn has resulted in almost 350 jobs losses, the closure of 66 licensed betting offices in only 9 months and a sharp reduction in betting duties. Earlier this year, the betting industry welcomed the decision of Government not to proceed with the proposed increase of betting duty to 2% of turnover. If this increase had been put in place, the impact on the Irish betting industry would have been disastrous. However, the fact remains that the current turnover tax is not appropriate for an industry, like betting, that cannot control its output. Ireland s approach to betting duty means that the betting industry must pay tax on turnover regardless of making a profit or not, placing the domestic betting industry at a severe disadvantage when viewed alongside our competitors. Furthermore, when all taxation is considered the average betting shop faces an effective, and highly penal, tax rate of approximately 98% (see The Average Licensed Betting Office, pg 5). The 1% betting duty is, therefore, having a significant and detrimental impact on a sector of the betting industry that is generating considerable employment and revenue for the exchequer. At a time when the domestic betting industry is in steep decline and already facing serious competition from forms of betting that do not come within the Irish betting tax net such as the internet, phones and mobile platforms we need a tax structure that will both protect an industry that is providing thousands of jobs and substantial revenue for this country whilst also attracting inward investment and job creation from international betting companies. This submission, put forward by the Irish Bookmakers Association (IBA), sets out the key reforms that we believe should be prioritised by Government to protect and promote employment, safeguard the contribution made to the exchequer by the betting industry, and encourage crime free, socially responsible, regulated environments for adults to enjoy gambling activities. Our reforms would also allow the Government to capitalise on new technological developments in betting, generating significant new jobs and positioning Ireland as a centre of international betting excellence. 3
These core reforms concern: 1. Legislation and Opening Hours o Reform opening hours to allow bookmaking outlets trade until 10pm each Wednesday, Thursday and Friday throughout the winter with immediate effect o Review the archaic legislation governing betting in Ireland 2. Taxation o Establish a Commission on Betting Industry Taxation to urgently examine the matter of betting sector taxation involving representatives from the industry 3. Horse Racing Ireland (HRI), Facilities, Race Schedules o Reform HRI funding to make savings, introduce efficiencies, and ensure that the burden of funding HRI is shared fairly and not carried by the off course retail betting market alone o Reduce the level of prize monies which are excessive o Make better use of facilities and improve race scheduling so that race meetings take place all year round and on winter evenings, adding considerably to turnover and the benefit to the exchequer o Ensure that the HRI Board includes a representative of the off-course betting industry which funds HRI and should have input into its activities 4. Smart Economy o Undertake reforms to position Ireland as a global centre of excellence for the betting industry, realising the creation of 3,000 new jobs in our sector With these sensible and straightforward reforms not only will the current contribution made by betting to the Irish exchequer be preserved, but the sector can also grow for the future. By working in partnership with the Government and with our key stakeholders, and progressing with these modest yet important reforms, Ireland can become a centre of excellence for our sector while generating extra employment and tax revenues. Sharon Byrne, Chairperson, Irish Bookmakers Association, Rathganly, Kilcock, Co Meath T: 046 9557090 M: 087 4181408 E: info@irishbookmakersassociation.com 4
IRELAND S BETTING INDUSTRY REAL CONTRIBUTIONS, PRESENT CHALLENGES Ireland s betting industry makes a very significant contribution to the economy at both a national and local level. There are approximately 1,175 licensed betting offices in Ireland. On average it is estimated that each office employs five people on a full-time or part-time basis. This translates into total employment of around 6,000 full-time or part-time jobs. This is equivalent to almost 0.3% of total employment in the economy, and 0.6% of total private service sector employment. The Average Licensed Betting Office: As an illustrative example, the average licensed betting office makes the following contribution to the national exchequer and the local authority in which it is located: Turnover 3,000,000 Gross Profit (@10%) 300,000 Net Profit (@3%) 90,000 Betting Tax (@ 1%) 30,000 PAYE/PRSI 20,000 VAT 20,000 Rates 7,500 Corporation Tax 11,250 Total Taxation 88,750 Taxation as a % of profit 98.6% Apart from the direct contribution made by the betting industry to the Irish economy in terms of employment, taxes paid by employees, taxation paid by the industry itself, VAT and betting tax collected, commercial rates, and the income multiplier effect, the indigenous and regionally dispersed nature of the industry is very significant. Jim Power, Economist (2008) The National and Local Taxation Contribution: Moving from the local to the national picture, the total contribution of licensed betting offices to the national and local economy is estimated as follows: Employment 6,000 jobs Betting Tax (@ 1%) 35,250,000 PAYE/PRSI 23,500,000 VAT 23,500,000 Rates 8,812,500 Corporation Tax 13,218,750 Total Taxation 104,281,250 5
The tax system for the industry is therefore badly in need of review. However, any such review is likely to come too late to save many independent operators; expect the number of shops in Ireland to start to fall in H1 2009 from its current peak of 1,250. David Jennings, Davy Stockbrokers It should also be noted that Ireland s betting industry also supports Gamcare Ireland which offers free phone and face-to-face counselling services for persons suffering as a result of problem gambling. Our members participate in regular training sessions, display Gamcare literature prominently in their shops, and have trained staff that can identify and assist problem gamblers and provide information and self exclusion forms where necessary. Notwithstanding these substantial economic and social contributions, it remains the fact that these are very challenging times for Irish betting. As with all businesses in Ireland the sector has undergone a painful process of adjustment to today s new economic reality. The overall share of the national betting market which is captured by licensed betting offices has declined very significantly in recent years and continues to fall. Correspondingly, betting duty is declining, and dropped by almost 3 million in 2008 ( 33.6 million) compared with 2007 ( 36.5 million). Projections for 2009 (c. 30 million) show a continued decline in this duty. In the last nine months the retail betting sector has seen almost 350 jobs losses as a result of the closure of 66 licensed betting offices. We the representatives of the major contributors to Ireland s betting industry strongly believe that our sector can be strengthened. The betting industry offers the Government the opportunity to create employment, increase the benefits to the exchequer, and make a real contribution to the development of a smart economy in Ireland. Whilst the trading situation for all businesses is challenging at present, this is also an excellent time for positive change and reform. With the right approach, and by progressing with a number of sensible and straightforward reforms, Ireland s betting industry can make a greater contribution. 6
THE ECONOMIC POTENTIAL OF REFORM Under Irish betting legislation, the summer betting period runs from April 1 st to August 31 st and the winter period runs from September 1 st to March 31 st. During both the summer and winter period there are some days on which no Irish racing takes place. During the winter period betting shop opening hours are also restricted. Both of these factors impact negatively on the betting sector but with reform the full economic potential of the betting industry could be realised. Summer: During the 2009 summer period there were 18 days on which no Irish race meeting was held. There were 88 days on which one Irish race meeting took place. There were a further 44 days on which two Irish race meetings took place. The betting industry estimates that each day an Irish race meeting takes place is worth approximately 1.6 million to our industry in terms of turnover. However, where a second race meeting is held on the same day there is no noticeable increase in revenue. Winter: During the 2008/09 winter period there were 79 days with no Irish race meeting taking place. On a further 76 days one Irish race meeting was scheduled. On another 24 days two Irish race meetings were held. The betting industry estimates that each winter Irish race meeting is worth approximately 1.8 million to the industry in terms of turnover. On the days when a second race meeting is held turnover increases by approximately 400,000. Therefore, holding a second race on the same day in the summer makes no impact on turnover, and in the winter a second race only realises only a small turnover increase. This shows that in order to maximise turnover and consequently taxation due to the exchequer the race schedule should be organised so that one race takes place on the maximum number of days throughout the year. Scheduling two races or more on any day, and leaving a large number of days with no race taking place, should be strenuously avoided. Opening hours: During the winter period licensed betting offices can only remain open on a Wednesday, Thursday or Friday evening when an Irish race meeting is taking place. Otherwise, these outlets must close at 6.30pm. During the 2008/09 winter period, licensed betting offices were open for approximately 18 Wednesday, Thursday or Friday evenings between September 1 st and March 31 st. Of the remaining Wednesday, Thursday and Friday evenings during this period (approximately 65 evenings) licensed betting offices were closed. Race meetings on winter evenings make a significant contribution to the betting industry. Additional turnover of approximately 1.2 million is generated during winter evening openings 7
and this increases to approximately 3.2 million when an Irish race takes place on the evening in question. The Reform Dividend Employment and Exchequer Returns At present there are currently approximately 100 days per annum with no Irish race taking place. By improving the scheduling of race meetings and having one race meeting on each day betting industry turnover would increase by approximately 160 million resulting in additional duty to the exchequer of 1.6 million. There are 65 winter evening opportunities for racing which if utilised could result in additional turnover to the industry of approximately 78 million (with no Irish race meetings) and up to approximately 138 million if the track at Dundalk was utilised on a further 30 winter evenings. Scheduling more Irish racing on winter evenings could, therefore, result in additional betting duties to the exchequer of up to 1.38 million. Furthermore, by extending opening hours the seasonal reduction in job numbers which occurs in retail betting shops at the end of the summer would no longer be necessary and employment would be bolstered all year round. Potential Additional Economic Contributions from Reform Increased Turnover 298,000,000 Extra Betting Tax (@ 1%) 2,980,000 More Employment An estimated 1,000 extra part time jobs (Approximately 14 hours per week each) 8
RECOMMENDATIONS TO REALISE THE FULL POTENTIAL OF IRISH BETTING Whilst the betting industry makes a significant contribution to the national exchequer and local economy, the challenges faced by the sector are considerable. To meet these challenges, and to build a stronger sector for the future creating employment and generating a bigger return for the exchequer, we are proposing four reforms concerning: 1. Legislation and Opening Hours 2. Taxation 3. Horse Racing Ireland (HRI), Facilities, Race Schedules 4. Smart Economy We believe that our proposals are constructive and, if implemented, will greatly assist the sector through the current downturn and more significantly increase the return to the exchequer for the future. 1. Legislation and Opening Hours The legislation which governs the Irish betting industry is archaic and out-of-date. It takes no account of the more recent technological developments which have revolutionised our industry. For example, the regulations governing the opening hours of licensed betting offices states that these outlets must close by 6.30pm from September 1 st to March 31 st unless there is an Irish race running after that time. By contrast, online operators trade 24 hours a day, 7 days a week. These regulations were devised long before the emergence of online and telephone-based betting giving them a competitive advantage over licensed betting offices and also preventing licensed betting offices from offering a menu of computerised betting events and products similar to what is available online. Our solutions Reform opening hours: The Irish betting industry is seeking an urgent review of the opening hours of bookmaking outlets to allow outlets trade until 10pm each Wednesday, Thursday and Friday throughout the winter with immediate effect. Bookmaking outlets are already open until this time during the summer months. We estimate that this modest reform coupled with increased winter racing at Dundalk could generate an additional 138 million turnover increasing betting taxation for the exchequer by 1.38 million (see The Reform Dividend Employment and Exchequer Returns, pg 8). 9
Review legislation: The Irish betting industry is seeking a review of the legislation governing betting which should provide for new betting technologies in shops where they can be controlled, monitored and benefit from the presence of fully trained staff. This would allow betting shops to compete with other operators, many of whom are not based in Ireland or making a significant employment contribution to the State. Social responsibility: We also propose that social responsibility practices should be mandatory and that all related sectors should contribute to participate and promote services such as those provided by Gamcare Ireland. 2. Taxation The Irish betting industry welcomes the fact that the doubling of betting duty to 2%, as proposed earlier in the year, was not progressed by the Government at that time. It remains the case, however, that the current 1% betting duty is having a serious impact on the sector as a whole. This duty is placing significant pressure on licensed betting offices, which incur high fixed costs and which are significant employers across the country. Furthermore, when all taxation is considered the average betting shop already faces an effective, and highly penal, tax rate of approximately 98% (see The Average Licensed Betting Office, pg 5). Licensed betting offices are disadvantaged when compared with other businesses as they may not reclaim VAT on business expenses unlike other enterprises. Therefore all their expenses are 21.5% higher. This matter should be addressed through the Commission on Betting Industry Taxation which the IBA believes should be established without delay. Licensed betting offices also operate at a competitive disadvantage when compared with other betting media, such as online, mobile and telephone, which are not subject to betting tax. There has been significant customer slippage away from conventional betting to online formats, as evidenced by the sharp decline in the overall share of the national betting market held by licensed betting offices over the past decade. Betting duty applied as a turnover tax is unique in Europe, is contributing to the closure of licensed betting offices, and gives substantial taxation advantages to offshore competitors. Put simply, betting duty is an unfair tax on only one segment of the betting sector, ironically a segment that generates significant employment across the country. In terms of online and telephone betting, it must be recognised that these elements of the betting industry evolve on a daily basis, requiring considerable ongoing research and development costs from the companies involved. Those members of the betting industry that are involved in online and telephone betting compete in a tough international market for business. 10
We do not believe that the online and telephone betting business of the 2 Irish companies providing employment in Ireland represents a significant taxation opportunity for the Government, but rather that a new approach to taxation throughout the sector would have the effect of attracting overseas investment into Ireland, expanding the jobs that are created by the betting industry and increasing the dividend to the exchequer as a result. A new approach to the issue of taxation of the betting industry in Ireland is, therefore, now required. Our solution A Commission on Betting Industry Taxation: The betting industry is calling on the Government to establish a Commission on Betting Industry Taxation involving representatives from the betting industry to urgently examine the matter of taxation reform. Such a new approach represents a considerable opportunity for the Government at this time. Adopting a fiscally prudent approach to taxation which sustains employment in Ireland by offering a similar taxation to that which is in place in other countries, whilst also attracting international players in the betting industry to Ireland, will expand the industry and increase the return to the exchequer. 3. Horse Racing Ireland (HRI), Facilities, Race Schedules The Irish horse racing industry is an important contributor to the exchequer and is vital for Ireland s betting industry. However, as the major stakeholders and contributors to the exchequer the off course betting industry has little or no say with the HRI in terms of making improvements and delivering additional revenues to the exchequer. We believe that reforms are required urgently in terms of HRI funding, the level of prize monies, the use of facilities, and the scheduling of race schedules which would benefit the sector, and exchequer, considerably. In terms of HRI reform, the level of funding given to HRI is six times the level received by the UK horse racing industry from the UK bookmaking sector. Total direct grants from the Department of Finance to the Horse and Greyhound Racing Fund from 2001 to 2008 totalled 545 million. There is no compelling rationale for why this should be the case. This situation is adding unnecessary pressure to the betting industry in terms of funding demands for HRI. In addition, the level of prize monies available in Ireland and set by HRI is excessive. For example, on July 1 st 2009 the prize money available at Fairyhouse was 157,000, almost the same amount as the total for the five UK-based meetings that took place that day alone. Clearly, however, the motivation to race horses at these meetings is not dictated by the prize monies available. Fixtures in the UK, offering only 30% of the total prize monies available in Ireland, have attracted the majority of their total runners from Ireland. 11
Our solutions Reform of HRI funding: The betting industry believes that the level of funding allocated to HRI should be examined. The recommendation of the Special Group on Public Service Numbers and Expenditure Programmes has proposed reducing funding to the Horse and Greyhound Fund by 16.6 million. The betting industry sees the potential for more significant cuts to be made as part of an ongoing programme of reform. As long as these very significant subventions are awarded to HRI, without any real focus on reform and outputs, there will be little incentive to HRI to improve their service to the industry or the consumer. Reform of prize monies: The motivation for owners to race their horses at these meetings is not dictated by the prize monies available. The betting industry believes that the current level of prize monies needs to be reviewed. Use of Facilities: Ireland has better facilities today than at any time in the past, but many are under-utilised. For example, Dundalk (redeveloped at a cost of 35 million) boasts an exceptional facility. However, Dundalk is the only all weather track that does not race in the winter. Greater use of Dundalk throughout the year but especially over the winter months would develop the offering to consumers from the bookmaking industry and at licensed betting offices, supporting employment and revenues to the exchequer. Race scheduling: A serious evaluation of race scheduling should take place, with a view to ensuring that there is a broad spread of consumer-friendly racing fixtures available, on as many days as possible, throughout the year. Ensuring that there is an Irish meeting available on as many days as possible would greatly enhance the offering to consumers and would benefit the industry by promoting Ireland-based events all year round. We estimate that encouraging more winter racing, and improving scheduling so that there is an Irish race meeting taking place almost every day of the year, could yield approximately 298 million in additional revenue per annum for the industry resulting in an extra 2.98 million in betting taxation for the Government (see The Reform Dividend Employment and Exchequer Returns, pg 8). Supporting HRI: The burden of supporting HRI should not fall entirely on the off course retail betting market the responsibility for supporting HRI should be expanded to include online, mobile and phone betting operators. The HRI Board: Finally, as major stakeholders and key contributors to the exchequer the off course betting industry should be represented on the HRI board. 12
4. Smart Economy The Government has recognised the development of a smart economy as being critical for Ireland s future success. Internationally, the global betting industry is investing significantly in research and development to improve their offering to consumers and to meet consumer demand through new betting media. Given the technological innovations in betting over the past decade the Irish betting industry has also invested in R&D, offering a range of employment opportunities for IT and web developers, programmers and many other IT professionals. The expansion of the betting sector in Ireland, and the positioning of Ireland as a global centre of excellence in betting, presents a huge opportunity to the Government at this time. Two of the leading global players in online betting are Irish companies, but there is the opportunity to generate significant numbers of additional jobs by increasing the number of online betting companies based in Ireland. An examination of the expansion in one of these Irish companies Boylesports illustrates this point. Boylesports based in Dundalk, County Louth also generates significant employment through non-retail betting. Approximately 250 people are employed by Boylesports in this side of the business including online and telephone betting at present. More than 60% of these employees are involved in highly skilled operations including programming, software development, online applications, and other IT developments. Ireland is already benefitting from the generation of a significant number of jobs from online betting companies that have operations in this country. An outline of this employment includes: Current Jobs provided by Online Gambling Firms located in Ireland Situated in Ireland Currently Employs Sporting Bet 170 Full Tilt 400 Cryptologic 16 BetDaq 110 Paddy Power 632 Boylesports 250 Bruce Betting 50 Total 1628 13
Now, by undertaking necessary reforms, the Government could position Ireland as a centre of excellence and global leader in the betting industry internationally and generate even more employment in this sector. Our solution Reform: Legislation, regulation and taxation reforms would make Ireland an attractive destination for betting industry investment. We believe that progressing these reforms would make a significant, long-term contribution to the national and local economy through the generation of significant additional employment in the sector. Taking action to make Ireland an attractive location for gaming and gambling investment would support smart economy developments through the employment of additional web developers, computer programmers, IT and computer science graduates. It would also have a knock-on effect in terms of support staff, marketing, and software development. The IBA estimates that up to 3,000 jobs could be created by promoting Ireland as a global centre of excellent in betting. Ireland boasts an educated workforce with specialist skills that can be deployed to develop the country as a centre of excellence for the bookmaking sector. Ireland also has an excellent reputation internationally regarding all aspects of betting and racing. The IDA estimates that almost 1,000 overseas companies have established operations in Ireland. They are a key driver of the economy employing over 135,000 people directly and many more indirectly. Ireland s betting industry is ready and willing to assist the IDA in encouraging overseas bookmaking companies to locate in Ireland. With the appropriate reform, Ireland can compete for significant international investment in our sector. 14
CONCLUSIONS Betting offices are located in towns, cities and villages around the country and are a very important source of employment across Ireland. The direct contribution made by the betting industry to the Irish economy in terms of employment, taxation paid by employees, VAT and betting tax, commercial rates, and the income multiplier effect, is very significant. By way of comparison, employment in the Irish betting industry is equivalent to almost 18% of the employment generated by the major retail bank groups in the Republic of Ireland. The Irish betting industry has a significantly greater coverage across Ireland than the banking industry, with more than 1,100 betting offices compared to 804 branches and 130 sub-offices operated by the major retail banks. These licensed betting offices typically occupy prime real estate locations. In a more difficult economic environment, with considerable office and retail space now becoming vacant, it would not be desirable to have these betting offices shutting down, cutting the contribution to local rates and adding to the excess supply of office and retail space available. In addition to the direct contribution made by the sector, the betting industry also plays a key role in supporting Ireland s successful horse and greyhound breeding and racing industry. For the future, Ireland s betting industry has the potential to generate signficant extra turnover, revenues for the exchequer, and more jobs. To do this we need reform. Betting shops offer a valuable social outlet and activity for many thousands of people across the country. They are well regulated and the sector takes its responsibilities very seriously, offering services for anybody affected by problem gambling with trained staff that can identify and act on any problems that may arise. The Irish Bookmakers Association believes that Ireland s policy makers should now prioritise reforms to create a regulatory and fiscal environment that protects indigenous jobs and a level playing field for the betting industry, maximising the return to the exchequer from our sector. If undertaken, these reforms will expand the contribution that our industry can make in terms of employment and the exchequer to Ireland s economic future. Sharon Byrne, Chairperson, Irish Bookmakers Association, Rathganly, Kilcock, Co Meath T: 046 9557090 M: 087 4181408 E: info@irishbookmakersassociation.com 15