With a further easing of restrictions likely in Ireland later this month, the return of inflation and an estimated annual growth rate in 2021 of around 15%, it is easy to understand why many people are starting to think we are entering the post-pandemic phase of our economic cycle. The export-orientated Irish economy has generally proved remarkably resilient to the economic shock caused by Covid-19.
Another aspect of the Irish economy that has held up well is our taxation base. Unlike the Irish Financial Crisis (2008-12) when the tax base imploded, Exchequer revenues have been largely robust to the pandemic and remain ahead of target for 2021. This is before November tax returns arrive - a very important month for corporation tax reciepts in this country.
While Ireland's corporation tax rate has made international headline again this week, and will move from 12.5% to 15% for any company with revenue in excess of €750 per annum, the focus of this post is on another tax; the sport-related betting duty.
First established in 1926 as one of the first revenue-generating measures of the new Free State government, the betting duty is levied on all off-course bets. Until 1986 the duty was applied at a rate of 20%. The decades that followed saw the duty collapse to just 1% on all bets in 2006, with an increase to 2% initiated in 2019. 2015 was also a significant year as the duty was expanded from 3 sources to 7, with the 4 new areas subject to the duty able to capture remote betting and remote bookmakers.
The broadening of the tax base has proved to be very effective.
In 2014, the narrow betting duty generated €26.67 million. In 2016, the broadened duty generated €51.96 million (almost double the amount collected in 2014). Increasing the duty from 1% to 2% in 2019 brought the total amount collected to €96.75 million and demonstrates the highly inelastic nature of the betting product.
2020 figures indicate that the betting duty fell substantially to €87.24 million. However, this can be explained by the shutdown of the economy and society from March to June 2020, where no sport took place. The reduction in revenue can be explained by a fall in the "Traditional Betting Duty" from bricks and mortar betting shops which were forced to close their doors.
However, 2020 figures show that "Remote Betting" increased from €40.6 million in 2019 to €44.94 million in 2020. These figures also mean that for the first time ever, revenue collected from remote betting activities now exceeds the traditional betting duty.
While this can be partially explained by the pandemic, one now has to question whether this change will be permanent. Have habits changed? Will bricks and mortar betting shops go the way of retail banks? This is an appropriate example on the day that Bank of Ireland will close 88 of their banks (1/3 of their locations) for the last time.
Due to restrictions throughout the first half of 2021, betting duty figures, when available next year, may not yet fully explain how people bet in Ireland. It could be only in 2022 or 2023 that a clearer pattern emerges, and it may be the case that remote betting is now the primary source of the betting duty.