A price war among Cork bookmakers will be discussed today at a meeting between representatives of the Irish Independent Betting Offices Association and the Revenue Commissioners.

An association spokesman, Mr Brian O'Farrell, will claim that O'Halloran Bookmakers, based in Youghal, Co Cork, is contravening the 1989 Finance Act by offering tax-free betting to Irish customers on its Internet website.

O'Halloran Bookmakers set up the website several weeks ago advertising: "All bets placed with luvbet.com and O'Halloran bookmakers are tax free."

The tax-free offer has drawn an angry response from local bookmakers who argue that tax-free betting is illegal and is undermining their trade.

Two rival bookmakers in Youghal, Cashmans and Paddy Power, have responded by offering a discount of 5 per cent on the cost of all bets placed.

Because of the standard 5 per cent betting tax, this means customers pay the same amount as if a bet was placed tax free.

Mr O'Farrell claims that offering discounts is allowed under Revenue laws but offering tax-free betting is illegal.

He said the legislation was designed to protect the independent Irish bookmaker from larger multinationals and offshore betting syndicates.

A spokesman for O'Halloran Bookmakers said that its tax-free system was essentially the same as the 5 per cent discounts currently on offer from competing bookmakers in Youghal.

He said that O'Halloran paid the full 5 per cent betting tax for all customers to the Revenue at the end of every week and whether it was illegal or not was open to interpretation.

He said that O'Halloran had doubled its business since the service started and had gained almost 100 Internet customers from Ireland and many more from abroad.

A spokeswoman for the Revenue Commissioners said that offering a tax-free betting service contravened Section 42 of the Finance Act 1989.

She said that any advertisement seen offering such a service could result in the Revenue Commissioners investigating the matter. The current issue of The Phoenix magazine runs an advert for www.luvbet.com.