Paddy Power is an online sportsbook in Ireland, and judging by the way they present themselves, they are proud to be Irish. It therefore comes as a shock to hear that they are seriously thinking of leaving home. The company’s chief executive Patrick Kennedy warned the world yesterday that they are considering moving their operations offshore if the tax burden in Ireland continues to rise.
The bookmaker didn’t have a record year. For 2009, they reported a 15% decline in pre-tax profits, down to €67.2m. This decline comes despite the fact that betting turnover was up last year (at least at Paddy Power’s high street betting shops). The company controls nearly one third of Ireland’s sports betting market.
There are several factors responsible for this decline. On one hand, the bookmaker claims that punters are getting better at picking winners, especially at the horse tracks. But the primary culprit is the ever-increasing tax imposed on internet betting in Ireland. The company paid €18m in taxes and fees last year, and now the Department of Finance is considering raising gambling taxes yet again.
Paddy Power financial advisors are concerned. Just a 1% increase in tax on betting turnover would remove €2.5m from Paddy Power’s annual operating profits – something which the company cannot afford. This is especially problematic since the group intends to dramatically expand their services over the next few years, employing an additional 250 people to keep up with the increasing popularity of online sports betting.
Moving offshore to someplace like Gibraltar would effectively halve the company’s tax burden. Last year, William Hill did exactly that, giving them a huge edge over their competitors. If Paddy Power wishes to continue to complete in the global online gambling market, they too may be forced to migrate. The company maintains a strong commitment to Ireland, but ultimately, it appears that profits could well take precedence over patriotism.