BUSINESS

Levy Board turns up the juice on bookmakers

TAGs: Jeremy Hunt, uk bookmakers

It’s a fullout shakedown on UK bookmakers to pay a levy on foreign horse racing. The Levy Board has their hands in the bookies pockets and they aren’t playing pocket pool, no, it’s more like hard ball.

Uk racing has registered a measure of success in its battle with the betting industry over the next levy scheme. Despite the attempts of bookmakers, who united to pen a letter to Jeremy Hunt in objection of the proposed levy changes, the BHA continues its fight to get it’s way.

The Levy Board’s three government-appointed members recommended that bookies should pay levy on bets placed on foreign racing and that the “threshold” system, designed to benefit smaller betting shop operators, should be poof, abolished just like that. Of course, that same threshold system was designed to protect those smaller operators, but it seems when the gloves come off things get a little dirty. The report argued that with racing now forming a much smaller proportion of shop turnover as a result of competition from sports betting and gaming machines, thresholds were no longer necessary. Obviously, that didn’t go over so well with bookmakers.

Under the current scheme by which bookmakers contribute a percentage of their gross profits to the sport, the numbers equate to around £75M to £80M, which the report points out is well short of the £130m to £150m that racing had insisted it required. Nothing makes things happen faster than when people aren’t getting paid. Both sides are now likely to spend several days deliberating the details of the submission to Jeremy Hunt MP, the man who is now required by law to determine the 2011 levy since the racing and betting industries failed to reach agreement.

There’s small victories to be had. The action on thresholds and a levy on foreign racing were the two heavy hitter pleas in racing’s submissions over the levy, and both received a favourable response from the Board’s independent members. If accepted by the government, the report could ensure that the sharp decline in levy yield that racing has experienced in recent years will be put to an end. The second point, the proposal to abolish thresholds, now that won’t go over so easily at all. This is likely to face fierce opposition from bookmakers, who will claim that it will threaten the existence of a number of betting shops where margins are already tight. And for those that aren’t as tight, well, a levy charge on foreign racing, which was would raise several million pounds per year, from money which is currently retained by bookmakers.

Interestingly enough, profits from gaming machines would not be subject to the levy. There is also one positive recommendation for bookmakers in this report. It’s not likely to cause any bookmakers to jump in the air for joy, but the report does suggest that the slice of their gross profits that is returned to racing be reduced from 10% all the way down to a 9%. Racing shouldn’t expect a slow clap on that.

Since they are outside of the Board’s jurisdiction, two issues were not discussed in the report, namely, the flight of most bookies’ internet and telephone operations to offshore sites, where they avoid both tax and levy, and the correct level of levy contributions from betting exchanges.

Patrick Nixon, the chief executive of the Association of British Bookmakers, said tonight that a detailed response to the report will be delivered via the Levy Board’s bookmakers’ committee, but he conceded that the abolition of thresholds is “something that racing has been pushing for for some time”. He added: “I would imagine that the committee will remain true to its view that there should be no increase in next year’s levy. We don’t accept that racing is in a desperate state or that there is any crisis in racing.”

A statement issued by the British Horseracing Authority said that the sport “will use the coming weeks to explain to Jeremy Hunt that we only see a reduction in the headline rate being remotely feasible if at the same time arrangements are made to secure fair contributions from overseas operators and betting exchanges”.

And so the battle wages on. Both sides will make their submissions and that poor chap Jeremy Hunt will have to rule on this whole matter sometime early in the new year. Bookmakers don’t accept that there’s a crisis, but Racing certainly begs to differ as they’ll argue they’re in dire need to boost revenue.

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