Tuesday, 1 June 2010

Paddy Power's turnover tax call

Interesting to see today that Paddy Power have called for a 1% turnover tax on Irish racing from Irish betting customers as a solution to that country's funding problems.

While it is clear that their motivation is to ensure that all those who profit in some way from Irish racing get caught by the tax, rather than just betting operators, it seems curious to me that any competitive operator should call for a turnover tax, which by definition builds in an incentive to keep turnover low and therefore margin high. Having high margin built into the domestic system is a recipe for stifling innovation and creating (or fuelling) a black market.

It was precisely to create innovation and stifle the black market that bookmakers in the UK advocated the change to a gross profits tax and away from a turnover tax in 2001. And it is precisely for that reason that progressive governments have since moved towards GPT, and protective monopoly ones have opted to try to ingrain turnover, since then.

As Paddy Power themselves are clearly in the innovative and progressive box, not to mention extremely competitive, it seems a curious move. Perhaps there is politics behind it that I don't understand.

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