Wednesday, November 09, 2011

Raising the matter of sports funding with Minister for Finance

Aodhán: I appreciate the opportunity to raise the matter of the horse and greyhound fund in the context of overall sports funding and promised legislation on online gambling.

Approximately €30 million a year is raised through a levy on gambling in Ireland. Regardless of what one’s bet is placed on, the levy goes directly to the horse and greyhound fund under the terms of the Horse and Greyhound Racing Act 2001. This is despite the fact that only 10% of bets placed relate to these two industries. A total of 80% of the fund goes to the horse racing industry and the vast bulk of this is spent on prize money. The prize money on offer in the Republic of Ireland is 60% higher than that in the UK. Also, the chief executive of Horse Racing Ireland received a pre-tax bonus of €57,000 in 2009.

This year, Irish Sports Council funding amounts to €25.6 million for 57 national governing bodies, 32 local sports partnerships and 18 high performance sports. Given our sporting endeavour, next year’s Olympic Games and the fact we all enjoy sports so much, one could argue that in the current recession sport is one of the only things keeping communities alive. It keeps children occupied and families entertained and gives us all a lift. This Friday, everybody’s eyes will be turned towards Tallinn hoping the Irish soccer team can go halfway towards qualifying for the European Championships.

The Minister for Justice and Equality indicated a levy on online betting will be introduced in spring next year. We believe this could raise approximately €90 million. Can I have a commitment that it will be spent on sports funding? Does the Minister intend to investigate the current funding criteria for the horse and greyhound industry? Has he asked the industry for indications of how the money is spent? Everyone accepts that the horse racing and greyhound industries are of great benefit, are fantastic employers and act as wonderful tourism magnets. At the same time, can we justify a situation where the vast bulk of the funding goes to prize money and the money spent on prize money is 60% higher here than in UK? I also referred to the figures on bonuses for the chief executive of Horse Racing Ireland.

There is inequity in sports funding, with €25 million going to the Sports Council, which looks after so many national governing bodies, local sports partnerships and high performance sports. At the Olympic Games next year we will talk about the performance of our athletes, how they are funded and how well they have performed. Is it justifiable that €25 million of our taxpayers’ money goes to that while €30 million of taxpayers’ money goes to the horse and greyhound industry? Is it justifiable that 100% of the levy raised on betting in this country goes to an industry when only 10% of the bets placed relate to that industry? If Paddy and Joe put €5 on Manchester United versus Chelsea, the levy raised on the €5 bet goes to the horse and greyhound industry.

Will the proposed levy on online gambling be funnelled back into the sports industry? Can we be assured it will not go in the same manner to the horse and greyhound industry and that it will be more equitably distributed?

Minister for Finance: 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. Those 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.

Aodhán: A cross-departmental response is required. What is the Minister’s instinct in respect of the equity of sports funding? The Minister’s response shows that €57 million has been provided this year for the horseracing and greyhound fund. No one wants to question the justification of funding for that industry, which is a wonderful industry and one Ireland is famous for. However, how does the Minister square giving €57 million to that industry in the current crisis, in view of the prize fund amounts, with the €25 million given to the Sports Council, which looks after 57 national governing bodies, 32 local sports partnerships and 18 high performing sports? Does the Minister accept there is an anomaly and will he commit to investigating a way in which we can address it?

Minister for Finance: These are the figures in the Estimate put together by the previous Government in the last budget in December 2010 for 2011. The Minister for Public Expenditure and Reform, Deputy Brendan Howlin, is negotiating with line Departments on the appropriate amount for each head for next year. In that context, he has had discussions with the Minister for Agriculture, Food and the Marine. I am sure discussions included this issue. My responsibility is simply to enact legislation and it is up to the two other Ministers to decide what the expenditure should be. Up to now, the principle was that whatever was raised by the levy went into the fund. There was a shortfall and, instead of the Estimate of €47 million being raised, the fund dropped to €30 million. That was as a result of what happened in 2006, when the then Minister for Finance reduced the levy from 2% to 1% without applying a new tax to the online aspect of the betting industry which was then taking much of the activity. In the last Finance Bill, my predecessor sought to correct this but the correction was subject to separate legislation being brought in for on-line betting. Those sections in the Finance Bill would be implemented subjected to a ministerial order. The on-line betting Bill has not been produced yet and obviously the new Government will have to have sight of it before the issues of principle and detail in it are ratified. I will try to get things done quickly and, if possible, in advance of the budget.