The days when punters crowded into smoke-filled betting shops to place their couple of quid on a horse may soon be at an end. Bookies, never slow to spot opportunities of increasing profit margins and shortening their odds to attain success, are tripping over themselves to embrace the Internet revolution.

The newest recruit to cyberspace in the Republic is the Belgard Group, better known for its chain of pubs than its single book-making outlet. Following more than two years of development the group is finally set to go live with its interactive website www.luckymurphys.com at the end of this month and believes it could be its passport to global success.

"We looked at all departments within our group to see which project was the most viable for going on the Internet. We firstly launched a cyber cafe and analysed how it worked," said Ms Louise McKeown, marketing manager with Belgard.

"We decided we needed a service that would have very little liberty control on it, high customer interaction and a big return for the customer."

Gambling on the Web may offer Belgard all three of these features, but it's the access to global consumers and huge profit which is persuading bookmakers to take the plunge.

Currently the western European and US online gambling market is worth $82 million (#86 million) but with access to the Internet set to grow rapidly in the next few years, profits are certain to surge.

A report by the UK-based research consultancy Datamonitor ("Online games and gambling in Europe and the US, 1999-2004") predicts the online gaming market will be worth $11 billion by 2004.

"The real key is to target the mass market rather than the big punter," said Mr Stewart Kenny of Paddy Power bookmakers.

He believes the type of punter using the Internet for gambling will be radically different from those in the betting shops. In the Internet era gambling may embrace women and a younger audience who have disposable income to spend.

Paddy Power will unveil its first interactive site in April and it will feature a range of sports, including American football and baseball as well as horse-racing.

"We're after the global market and will offer a range of different sports and the ability to bet on cross-board multiple bets on different sports, something few sites currently offer," said Mr Kenny.

However, to target the global market, Irish bookies have to offer competitive odds and a competitive tax regime. Most of the established international Internet gaming sites offer bets tax free or with only a small 1 or 2 per cent charge for handling the bet. They do this by setting up in tax-free or low-tax countries such as the Isle of Man, Antigua or Gibraltar.

The Irish betting tax was reduced from 10 per cent to 5 per cent last July to protect Irish bookmaking from the offshore operators. However, many bookies claim even 5 per cent is making their own operations vulnerable to offshore competition.

Mr Kenny believes there should be two tax rates for betting to take account of the Internet revolution. "It's not realistic to tax people on the Internet, other groups have tried it but have been forced to reduce the levy," he said.

He points to the UK where bookmakers are engaged in a battle with Chancellor Gordon Brown over a 10 per cent UK betting tax. William Hill relocated its Internet server to Antigua, serviced by a call centre in Athlone last year to avoid tax. Several other large bookies are threatening to do likewise.

Several have contacted the Department of Finance with a view to establishing call centres on a similar vein to William Hill's operation.

The Belgard Group originally anticipated locating its Internet server overseas to avoid the Irish tax regime, but after Mr McCreevy's betting tax reduction last year it will establish the site in the Republic for a trial period at least.

"We will absorb the 5 per cent tax to start with and we will evaluate it after a period of time," says Ms McKeown.

However, Luckymurphy's has developed an offshore strategy and has already applied for a bookmaking license in a low-tax regime. If the betting tax in the Republic doesn't come down soon, then there is a strong chance it won't stay here for long.

O'Halloran's Bookmakers, based in Youghal, Co Cork, was the first bookmaker in the Republic to take the jump into cyberspace and claims to be taking £1 million a month in online bets. It has also chosen to absorb the 5 per cent tax, but the group is lobbying the Department to reduce the tax further.

If the tax rate is reduced, Irish bookies claim the Republic will become a vibrant centre for worldwide Internet gaming. The Government's commitment to e-commerce is unquestionable and it is understood that Mr McCreevy is considering reducing the tax rate to 3 per cent. However, there could be other challenges to overcome.

"Security is the biggest concern for all involved in this," says Ms McKeown. "We customised our own and worked with a number of Irish companies in order to build this."

The public will have to gain confidence in making credit-card transactions over the Internet for Net gaming to take-off and payment solutions need to be refined.

According to Ms McKeown, the Irish banks were unable to accommodate the group in this respect. "We've investigated the Irish market for the last 18 months and not one of the Irish banks provided us with a solution." The correct solution came from abroad.