A Cork bookmaker has set up an overseas Internet betting service to offer domestic punters tax free betting in a move which is likely to be followed by other Irish bookies and could cost the Exchequer millions of pounds in lost taxes.
O'Halloran's bookmakers based in Youghal, Co Cork, secured a betting licence in Malta last week and has transferred its Internet betting arm - www.luvbet.com - to an overseas subsidiary which will not pay tax to the Irish Exchequer.
The service, which is freely available to Irish customers, does not charge any tax, commission or credit card handling fees and offers prices on a variety of Irish and international sports and political events.
Although several Irish bookmakers have set up Internet operations offering tax free betting these have been based in the Republic and have paid the 5 per cent betting duty to the Revenue Commissioners on behalf of the customer.
The decision by O'Halloran's to go to Malta was spurred by the low 0.5 per cent betting tax rate and it is likely to be followed by other bookmakers.
Paddy Power's, which established its Internet operations in June, is understood to be in the final stages of finalising offshore licences in Malta and Jersey.
Several other Irish bookmakers are understood to be seeking licences in low tax areas such as Gibraltar, Isle of Man and Antigua.
Mr Stuart Kenny, managing director of Paddy Power's, said the move by O'Halloran's to go offshore could force his company's Internet arm to move offshore shortly.
"During Galway week we subsidised the tax on our Internet operations to the tune of £10,000, we aren't going to do that for long," he said.
"There is a need for either two different tax rates: one for new media and another for traditional shops or two different tax bands for Irish and international customers," he added.
Mr Gary O'Halloran, owner of O'Halloran's Bookmakers, said the luvbet service which was launched in April last year was now making more than £1 million in revenue every month.
He claimed that the decision to move offshore followed a meeting with the Minister for Finance, Mr McCreevy, earlier this year where there was no agreement reached to reduce the betting tax.
The Government is currently reviewing the whole area of taxation and betting but is unlikely to make any changes at least until the next Budget.
Under section 33 of the Betting Act 1931 it is illegal for residents in the Republic to place bets overseas but there is nothing the Irish authorities can do to stop it, according to Revenue sources.
The move offshore could also have implications for the future of Irish racing which was recently guaranteed a share of off course tax revenue provided the three horse racing bodies - the Irish Horseracing Authority, the Turf Club and the Association of Irish Racing - agreed to merge.
Last year this was worth more than £50 million but would fall if bookmakers moved offshore and customers adopted the more cost effective form of betting on the Internet.
