You can blame Paddy Power for a lot of things but you can’t really blame it for threatening to go offshore.
With profits having taken a serious hit in 2009, the bookmaker is now faced with the possibility of the Irish government increasing it’s betting tax. Just a 1% increase would mean that ‘Green Square’ would have to cough up an extra €2.5m a year, which would make zero business sense for a firm that already shelled out €18m in taxes and fees alone last year.
Paddy Power is by far and away Ireland’s leading bookmaker with high street betting turnover accounting for nearly a third of Ireland’s sport gambling market, but far and away is where it will have to go if it keeps getting hit in the pocket. Even though it is World Cup year, it will almost certainly be turnover rather than profits that spike in the summer – as the favourites invariably go the distance in football’s most coveted tournament.
Ireland has unquestionably been hit hard by the recession. Of the countries in the Eurozone probably only Greece has suffered more, with Eire’s economy shrinking by 10% in 2009 following the housing market crash. Victor Chandler went so far as to describe Ireland’s betting market as “destroyed”. “Turnover’s down nearly 50% from its high nearly two and a half years ago, but the number of bets is up,” he said. “There’s just no money in Ireland. It’s destroyed. The number of bets is better but the business is smashed. We’ve got no big players. Everyone seems to have been damaged.”
The Irish government needs to help the ailing gambling market not finish it off by listening to Horse Racing Ireland’s plans to impose an online betting tax or inflicting punitive fiscal measures that will chase their leading businesses away.
In British Columbia, Canada, for example, $347m has been promised by the governing BC Liberals in order to kick-start the online gambling industry. I daresay the Irish treasury doesn’t have that sort of spondooly swishing around in its coffers given that Ireland hasn’t hosted a Winter Olympics recently – although given the weather it had lately it probably could have done – but the point is it needs to encourage not discourage the industry.
Chief executive Patrick Kennedy believes that by moving operations to Gibraltar, as William Hill and Ladbrokes did last year, his company would more than halve its tax burden – and the 250 jobs they are planning to create in their Tallaght headquarters in Dublin over the next three years would disappear from the Irish economy, along with the 650 jobs that currently exist there.
Of course not everyone would be disappointed to see the back of Paddy Power. One of the reasons the Irish High Street bookmaker is suffering so badly is because Paddy Power is forcing them out of business, squeezing margins and absorbing them into its massive online operation.
But the fact is the Irish government needs Paddy Power more than Paddy Power needs the Irish government. Despite its cheeky chapy image, this is a growing global empire so, love them or loathe them, you’ve to give them a break. Preferably, a tax break.