Michael Noonan (Limerick City, Fine Gael)

Some of the issues raised by Deputy Ó Ríordáin are more appropriate to the Minister for Agriculture, Food and the Marine. I will reply to the matter in respect of a levy on online gambling and we can have a conversation about the other issues.

I am pleased to take this opportunity to speak on the subject of extending the betting duty to remote betting firms, including betting exchanges that offer their services to consumers in the State. Work has been ongoing in the context of the draft betting (amendment) Bill towards widening the tax base in respect of betting duty with the view to extending the duty to remote bookmakers and betting exchanges. This widening of the base has always been regarded as difficult to do from a legal and practical perspective because online and phone betting services are primarily offered by offshore, out-of-State entities.

The main provisions of the betting (amendment) Bill are to amend the Betting Act 1931 with the objective of bringing remote betting, including betting exchanges, within the existing regulatory framework, including measures to enforce the regulatory framework. It provides that any remote bookmakers or betting exchanges that wish to offer their services to consumers in the State must obtain a licence to do so. A condition of that licence will be to pay betting duty or betting intermediary tax in respect of bets accepted that originated in the State.

Betting duty of 1% on turnover has applied to bets placed with traditional bookmakers since 2006. The 2006 legislative provision also moved the liability for the tax from the punter to the bookmaker, the context for this being an attempt to stem the migration of consumers from traditional bookmakers to remote bookmakers. However, the lowering of the rate to 1%, together with a significant reduction in betting activity due to the downturn in the economy and a growing share of bets being placed over the phone or online with offshore non-taxed entities has seen betting duty receipts fall from a high of €54 million in 2007 to an estimated €30 million this year.

Historically, betting receipts have been tied to funding for horseracing through the horseracing and greyhound fund. This fall in betting receipts has widened the gap between the level of Exchequer funding seen as desirable for the sector. Some €57 million has been provided in 2011, along with the receipts from the betting duty. What is now being proposed will allow us to recapture much of the revenue lost to online or remote outlets. The extension of betting duty to remote bookmakers is necessary to ensure, first, that firms that offer their betting services to residents in the State, regardless of what platform is used, are treated equally in terms of the taxation of that activity and, second, that the extension of the betting duty will widen the tax base and protect the Exchequer from the leakage of potential tax revenue.

The Deputy will be aware that what is being prepared by my Department for the provision of a regulatory and licensing regime to enable the taxation of remote betting is an interim solution, pending the outcome of the major overview on the regulation of all gambling in the State being conducted by the Minister for Justice and Equality. In this regard, in July the Government approved proposals from the Minister for Justice and Equality for the preparation of a comprehensive Bill on gambling, which will include, inter alia, the regulation of remote gambling services, including betting services, and provide for the repeal the Betting Act 1931, as amended.

Consequently, the Finance Act 2011 contained measures to allow for the extension of the betting duty to remote bookmakers and betting exchanges, including respective licence fees, which are based on the level of turnover, and annual commission earnings, respectively. The provisions in the Finance Act 2011 are subject to a ministerial commencement order. The provisions in the Finance Act cannot be commenced, however, until the betting (amendment) Bill, which contains the necessary regulatory and licensing provisions, is enacted.

The level of taxation provided for in the Finance Act is 1% on turnover in respect of remote betting firms, the same level that currently applies to their bricks and mortar counterparts. To take account of the particular business model of betting exchanges, a tax on the commission an exchange charges its customers will apply. This is in line with the level of tax elsewhere.

Enforcement and compliance will be a key aspect to the successful regulation and taxation of remote betting firms. That potential difficulties in that regard should not be underestimated, especially with regard to firms that have no presence in the State. However, it is desirable to make such offshore providers subject to the betting tax.

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