French lesson highlights importance of homework

BHA must ensure UK racing receives rightful income from offshore operators more »

Monday, September 2, 2013

ROA President

Last month I wrote about French racing’s success in convincing the European Commission that a turnover levy on betting operators was legal and I make no apologies for returning to this subject.

A basic premise of the relationship between any racing and betting entity is that, when a bet is struck on a race, the performers and venue receive a percentage from the profit made on that bet. This is how it works in almost all sophisticated racing industries throughout the world but not how it works any more in Britain.

Of course, such a system applies automatically to a tote monopoly, with a proportion of the betting turnover being subtracted to cover prize-money and the running costs of racing and the remainder being returned to winning punters. In Britain, we have always been denied the simplicity of this arrangement but at least the levy – imperfect though it has been – was introduced in the early 1960s to recognise that racing was entitled to receive a payment from those bookmaker profits earned on horseracing.

The principle upon which the levy was founded began to disintegrate when bookmakers realised, if they were to situate large parts of their businesses offshore, they could avoid paying not only tax on their profits but also their payments to racing on those bets which were received in an offshore jurisdiction.

In the early years of bookmaker re-location, no-one truly appreciated the consequences of what was happening. Yes, it was understood that some of the credit bets taken on the phone would escape tax and levy, but this then still represented a relatively small proportion of all bets on horseracing at a time where betting shops continued to reign supreme.

In the early years of bookmaker re-location, no-one truly appreciated the consequences of what was happening

We had little appreciation of what was around the corner in terms of information technology and therefore no real understanding that betting via the internet would soon dramatically transform the landscape. Then the realisation began to dawn that British racing’s income from betting would be linked almost exclusively to those bets struck in British betting shops because the levy could not be applied to the fast-growing offshore, online business.

So, while it is true that the sale of racing pictures to betting shops has done much to bolster the finances of racecourses – allowing horsemen to receive an indirect benefit – the fact remains that British racing’s income from the betting industry is short by a very large amount, though nobody on racing’s side of the fence is in a position to say exactly how much.

The solution seemed obvious. We needed to change the legislation underpinning the levy so that all bets struck on British horseracing overseas also attracted levy payments. But soon the bookmakers and government crushed this proposal on the premise that European law would not allow this. The levy, so the argument ran, was enshrined in legislation that pre-dated the European Union and any move in this direction would fall foul of our old friend State Aid. At the time, the BHA swallowed the argument, yet we now know that UK law is in the process of being changed so that gross profits tax is charged at the point of consumption, though, crucially, not the levy.

It seems the British, in typical fashion, had accepted the State Aid argument without too much rancour when, out of the blue, we hear that French racing has convinced the European Commission that a turnover levy on the betting operator of 5.8% is acceptable.

If the French can do this, the BHA must enlist the help of government to put British racing in the same financial position as its Gallic counterpart.

British horseracing is a massive contributor to both treasury coffers and employment numbers but this is simply not being acknowledged by the relevant minister. The BHA must continue to bang on his door until British racing receives its rightful income from offshore betting operators.

Join our newsletter
Email: be notified of updates to our site

About Rachel Hood

ROA President

Send this article to your smartphone

Install a QR Code Reader to your smartphone to scan.

More

More in this category: ROA Leader