The Revenue Commissioners warned the Minister for Finance that reforms to betting taxes could lead to bookmakers splitting their operations in order to reduce the amount they had to pay.
Changes in Budget 2020 gave bookies a €50,000-a-year relief from the tax levied on bets placed in Ireland.
However, in advance of the changes – called "de minimis" reforms – being introduced, Revenue told the Department of Finance that it had "compliance concerns" about the move.
An internal departmental briefing note for Paschal Donohoe says the tax authority was concerned "that it could provide a fiscal incentive for bookmaking operators to artificially arrange their operations in order to reduce their betting duty liability".
Despite the warning, the department proceeded with the reforms, which mean that bookmakers do not have to pay tax on the first €50,000 in wagers that they take in a given year.
Effectively, Revenue was concerned that a single bookmaker could restructure itself into multiple corporate entities and take advantage of the €50,000 shelter on several occasions, despite the revenue coming in through what was in fact a single business.
Industry backlash
The reforms were designed to give smaller independent bookmakers some meaningful relief from the tax, which was doubled from 1 per cent to 2 per cent in Budget 2019. That move led to a backlash from the industry, which warned that the Government’s reforms would imperil jobs in the sector.
However, the note supplied to Mr Donohoe observes that activity in the sector did not dip following the introduction of the tax. “Receipts in the year to date are €68.1 million, 6.5 per cent ahead of profile and strongly up on the same period last year,” his officials wrote.
The note shows that the introduction of the tax relief reforms was projected to cost the exchequer €2.5 million compared with what would be brought in without changes. A third option of increasing the levy by 0.5 per cent, alongside higher charges on commissions, was examined – this would have brought in an extra €26.3 million, but the Government decided against it.
The note shows that the department sought advice from the European Commission on the proposal, as well as a proposal from the betting industry which would have reformed the system and levied a tax on gross profits rather than on turnover.
Both Brussels and the Revenue Commissioners objected to the industry's suggested model, the briefing note shows, and the Government discounted it as a possibility.
Revenue advised that if the Government was to introduce the reforms which were ultimately enacted, “it would be prudent to implement it on the basis that if any evidence emerged of betting duty avoidance by bookmaking operators in the aforementioned manner then the de minimis threshold would be abolished”.
A spokesman for the Department of Finance confirmed that such steps would be taken if abuse of the shelter was discovered.
