Paddy Power Betfair Shares Plummet After Gambling Tax Hike
More than £250 million has been wiped off the value of gambling giant Paddy Power Betfair after the Irish Finance Minister revealed plans to double the betting tax levy to two percent.
Paschal Donohoe unveiled plans to increase the betting tax levy from one percent to two percent in addition to increasing the betting duty on the commissions earned from betting exchanges from 15 percent to 25 percent.
A Regulatory New Service (RNS) was released by Paddy Power Betfair to the London Stock Exchange that revealed the changes in the Irish Government’s 2019 Budget would have seen the company pay an additional £20 million in betting duty in the 12 months ended Jun. 30, 2018 had these new taxation rates been in force.
Shares traded at 6,510 pence per share at the end of trading on Oct. 8 then plummeted to 6,175 pence per share at the end of trading on Oct. 9. Currently, at time of writing, the share price is 6,075 pence per share.
It is quite a fall from grace as Paddy Power Betfair’s shares were trading at 9024.9 pence per share on May 31, so this freefall has wiped off almost 33% of the value of the company in the past five months.
Joe Quinn, an analyst for Davy Stockbrokers, write in the Irish Independent newspaper that the tax changes have resulted in Ireland “having one of the more penal regulatory backdrops for the gaming world, equating to around 30 percent tax on online net revenues.”
Ireland is a hugely important market for Paddy Power Betfair with approximately 10 percent of its European online revenue deriving from the country. This extra tax, coupled with a ban on advertising in Italy and with some experts challenging the company’s strategy in the United States, have contributed to the dramatic fall in the share price.
Meanwhile, the Irish Bookmakers Association (IBA) have warned that these new tax laws will result in smaller, independent bookmakers going out of business.
The IBA chairperson Sharon Byrne claims as many as 300 betting shops will be forced to close at a loss of 1,500 jobs. Doubling the tax, Byrne claims, would wipe out the profits of betting shops that have an annual turnover of less than €2 million.
Both tax increases come into force on Jan. 1, 2019 and is thought to generate €40 million of extra tax fund in the first year alone.