ABB Wants Betting Exchange Levy Issue Revisited

21 November 2003

Once again land-based book makers in the UK are turning to the office of Customs and Excise to rework a levy scheme in place for betting exchanges, and once again Mark Davies is confident their efforts will be met with failure.

Earlier this week, Tom Kelly, the chief executive of the Association of British Bookmakers, said he urged the Customs and Excise office to re-examine the taxation system in place for betting exchanges.

“Traditional bookmakers are picking up the tab for the exchanges,” Kelly said. “The reality is that, contrary to what they keep trying to tell us, they are not bookmakers – what they are is dating agencies. They bring two consenting parties together.”

This sort of sentiment from traditional book makers is nothing new to Davies, the communications director for Betfair. Despite being the world’s leading person-to-person betting exchange, Betfair has come under fire from the traditional bookmaking industry. But Davies said those in the government that are neutral to the betting industry and have studied the issue, all come to the same conclusion.

The bookies accuse the exchanges of enjoying an unfair taxation advantage by not forcing their punters to pay a bookmaking license, despite having the ability to lay horses and teams to lose .

“The UK government published its draft Gambling Bill which reiterated its view that our layers are not bookmakers,” Davies said. “The ABB and Tom Kelly don't like it, and they are lobbying to change it.”

Kelly said he supports the British Horseracing Board’s Peter Savill’s recent request for an inquiry into betting exchanges and how they fit into the new Gambling Bill.

“The betting exchanges pay tax and levy, but only on the commission they earn,” he said. “They are not paying their fare share for putting their show on the road.”

Davies defended the existing system whereby punters using betting exchanges to lay horses are not taxed on their winnings.

“Yes, we are paying,” he said. “We are paying 15 percent tax and 10 percent Levy on all our commission – and our profit is our commission, it’s how we make our money.”

Davies indicated that Betfair is scheduled to release a report that looks into the betting habits of its punters and some of the statistics are likely to turn some heads in the betting industry.

He said some of the highlights of the report are that rather than people laying every horse, 74 percent of punters who trade on the site lay only one horse.

“That’s not the nature of bookmaking,” he said. “Fifty-one percent of our racing business comes from people who are trading on races, buying and selling when they think the prices are right, like they would with shares. And another 10 percent of money comes from in-running betting – that’s 61 percent of our turnover which could not take place with a traditional bookmaker.”

Davies said Betfair is getting tired of having to deal with the same tax issues over and over again, even after C&E reached what the government felt was an equitable scheme for both parties involved.

“They've been arguing the same thing for nearly two years now and there's not an independent observer who has come out in agreement with their view,” he said. “Once you look at the facts and numbers rather than listen to the conjecture, you start to realize that the arguments of these vested interests who say we are not paying our way, and that they would generate more money in tax and levy than we would from the same punters, are groundless.”

Savill’s request for the Gambling Bill to be further scrutinized should be taken up by the end of this year. It is likely that the betting exchange issue could be referred to a joint committee of the Parliament.

C&E could decide to revisit the tax scheme, or leave the system in place. If serious revision are contemplated the office would likely take the issue up within the first part of 2004.

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