What makes a successful punt even better is that it's tax-free - but hold on to the evidence, writes Barry O'Halloran
FOR ANYONE who likes a punt, the good news is that the Revenue Commissioners say that you don't have to pay tax on your winnings, but the bad news is that you can't write off your losses either.
The reason is that the Exchequer can't depend on income from people backing horses or playing cards, as these involve a large element of risk.
However, some people do get lucky. Former taoiseach Bertie Ahern recently told the Mahon Tribunal that part of the £15,450 held in his and his daughter's building society accounts during 1994 came from winning bets on the horses.
Even if the winnings were substantial, they're still not subject to tax. However, the Revenue Commissioners say that if someone were to use this to explain how they came into a large sum of money, then that person would have to prove it.
"They'd have to produce evidence of some kind, we wouldn't just take their word for it," a spokesman says. If they can't provide that evidence, the chances are that they would have to pay tax on the money, as, in the absence of any other explanation, the tax authorities are likely to regard it as income.
The spokesman didn't say if anyone has used this explanation, but he made it clear that anyone who does would get a sceptical response. There is another issue. According to AL Goodbody solicitor Maire Conneely, the EU's third money-laundering directive obliges the Republic to regulate casino clubs to safeguard against money-laundering.
As part of a series of reforms, the British government recently established a Gambling Commission which, according to Conneely, approves the systems casinos put in place for recording their customers' spending. Once casinos have approval, they must seek identification from customers who buy or cash in chips worth €2,000 or more, or who bet €2,000 or more.
The Oireachtas has yet to pass any laws along these lines. However, all casino clubs in the Republic require formal identification before giving anyone membership. Winning punters don't pay tax, but the businesses that make their money from gambling do. Bookmakers pay the same 12.5 per cent corporation tax on their profits as every other company. For example, bookmaker Paddy Power plc's accounts for last year show that it paid more than €13 million in corporation taxes last year on its €75 million profits. The Boylesports chain paid a little more than €2 million on its €15 million surplus last year.
On top of corporation tax, bookmakers pay a 1 per cent levy on all bets they take. The State body, Horse Racing Ireland, collects this on the Exchequer's behalf and passes it on. This money provides the basis for State support for the Republic's horse and greyhound racing industries.
According to the latest figures, horse racing received €56 million back from the Republic's Horse and Greyhound Racing Fund in 2006. Last year, Bord na gCon, the State's dog-racing body, got €5.4 million from the levy and its Tote betting operations combined.
The figures indicate that it's a good investment. Research carried out in 2004 by economic consultants Indecon found that the Irish horse racing and breeding industries employ 16,000 people, largely in rural Ireland, and contribute more than €300 million a year in taxes.
Maire Conneely argues that the Government could be missing out on an opportunity to earn even more money, because it has failed to regulate parts of the gambling industry and to keep up with online developments. She points out that the popularity of the National Lottery alone indicates that Irish people have an appetite for gambling.
"By not imposing a gambling tax or taking steps to regulate gambling, the Government has failed to capitalise on this interest and has missed out on significant tax revenue from an industry that has been valued at more than €3 billion a year," she says. As the traditional tax base becomes less lucrative in a slowing economy, the odds against the Government turning to gambling for new revenue must be shortening rapidly.