Pearse Doherty (Donegal South West, Sinn Fein)
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Question 179: To ask the Minister for Finance if he has examined the potential to tax online gambling; the estimated return to the Exchequer if a 5% tax was placed on each bet made here regardless of the company handling the transaction online. [27430/11]

Michael Noonan (Limerick City, Fine Gael)
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The Finance Act 2011 contains legislation that, subject to a Ministerial Commencement Order, provides for the extension of the 1% betting duty to remote bookmakers and a 15% gross profits tax on betting exchanges that offer their services to consumers within the State. The tax changes provided for in the Finance Act can only be implemented once the Betting (Amendment) Bill, which will provide for a regulatory and licensing regime, is enacted. The Betting (Amendment) Bill 2011 is currently at an advanced stage of drafting. It is expected that by including this high-growth area of the betting sector, particularly given the increasing prevalence of smart phones, the tax base from betting will be boosted significantly. In a full year it is expected that the tax yield could grow up to €20 million depending on the prevailing market conditions.

Just as important is the positive signal this measure will convey to international betting operations that have expressed an interest in or have already invested in Ireland. A location with an appropriate licensing framework coupled with relatively low taxes provides real investment and employment opportunities in this sector.

It should be borne in mind that a 5% tax on turnover would equate to around a 50% tax on profits (based on a bookmaker operating on a 10% gross profit margin) and would be in addition to corporation tax etc. While such a tax rate may, in theory, increase the potential yield, it is very likely that the overall benefit to the Exchequer would be negative due to lack of investment by firms, a reduction in current employment levels and by potential tax avoidance by firms located outside the State. On the other hand, if the tax was to be placed on the punter, there would be a strong incentive to seek out unlicensed bookmakers thereby leading to tax leakage.

Enforcement and compliance will be a critical area if the taxation of online betting is to be successful and that is why the tax levels provided for in the Finance Act 2011 are deemed appropriate together with providing for an environment that would attract future investment and employment opportunities.

Pearse Doherty (Donegal South West, Sinn Fein)
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Question 180: To ask the Minister for Finance his views that the current system of carrying forward investment losses for the purposes of avoiding capital gains tax can be continued; if he will consider a time limit for the carrying forward of these losses; and the estimated savings to the Exchequer if this facility was limited at five years. [27431/11]

Michael Noonan (Limerick City, Fine Gael)
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A provision for allowing losses to be offset against profits or gains is common to a number of taxes, including Income Tax and Corporation Tax as well as Capital Gains Tax (CGT); and there is no time limit for carrying forwarded losses under any of these taxheads. A chargeable loss arises if a taxpayer disposes of an asset for less than the cost of acquisition – in other words, if the asset has declined in value. Therefore Capital losses are not being made to avoid CGT per se. However, many assets have declined significantly in value and claims for capital losses have the potential to affect the CGT yield.

The Deputy will be aware that the Memorandum of Understanding with the ECB, EU and IMF provides for a reform of CGT. The level and timeframe of any changes will be determined in the context of the Budget following the comprehensive expenditure review.

It is not possible to estimate the yield from limiting loss relief claims as suggested by the Deputy.

Pearse Doherty (Donegal South West, Sinn Fein)
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Question 181: To ask the Minister for Finance the potential savings to the Exchequer in limiting the time period over which businesses can carry forward profits for investment purposes capital allowances to five years. [27444/11]

Michael Noonan (Limerick City, Fine Gael)
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I assume the Deputy is referring to the imposition of a time limit on the carry forward of losses in circumstances where a business does not have sufficient profits against which to offset capital allowances. In computing the trading profits of a business for tax purposes, deductions are not generally available for capital expenditure, whether in respect of the cost of capital assets purchased or by way of depreciation. However, deductions in the form of capital allowances may be made for certain types of capital expenditure as specified in the Tax Acts. In the case of companies, capital allowances are treated as a trading expense of the trade and, where the amount of capital allowances for an accounting period exceeds the trading profits against which they are to be deducted as a trading expense, the excess is treated as a trading loss for that period.

Under existing loss relief provisions in the Tax Acts, any unrelieved trading losses of a company for an accounting period may be carried forward for offset against trading income of the same trade in future accounting periods. No distinction is made in this regard between losses incurred as part of normal trading and losses generated as a result of insufficient profits to absorb capital allowances in an accounting period.

While trading losses carried forward may only be offset against future trading income of the same trade and not against any other profits, there is no time limit on the carry forward of such losses and any unused trading losses may be carried forward indefinitely until they are fully offset or the trade ceases. I am informed by the Revenue Commissioners that the potential saving to the Exchequer if a five year time limit were to be imposed on the carry forward of trading losses would depend on the future profitability of businesses carrying losses forward and their capacity to utilise such losses within a five year timeframe. As it is not possible to anticipate what this might be, an estimate of the potential saving is not available.