Last week's announcement that Corals, the bookmaker which was bought by investment bank Deutsche Morgan Grenfell's private equity arm, was planning to relocate its telephone betting service to a tax haven was followed quickly by news that rivals Ladbroke and William Hill planned to follow suit. The proposed move offshore, which is designed to circumvent the 6.75 per cent betting tax, has been stimulated by competition from Victor Chandler's Gibraltar-based operation. The threat comes ahead of negotiations to finalise the levy that bookmakers contribute to the sport. Racing figures believe that the current levy, which is 1 per cent of bookmakers' turnover, is too low, but they fear that the betting industry will use the current furore over tax to justify freezing the levy.
Michael Harris, chief executive of the Racehorse Owners Association, said: "We fear that bookmakers will use this situation to show that they are not in a position to pay a greater price through the levy for the racing product. As things stand, they may be able to make that argument. This issue provides the betting industry with a ready-made excuse for not paying a higher levy."
Although the issue only affects telephone or credit betting, which accounts for about 10 per cent of the industry, there is concern that the offer of tax-free gambling could reduce the profitability of betting shops. Mr Chandler, for example, charges punters just 3 per cent compared with the 9 per cent that is typically levied on domestic bets. Although he only controls a small proportion of the market, the big bookmakers are especially concerned that regular customers with most to gain from avoiding betting tax will defect.
The British Horse Racing Board does not oppose the betting industry's desire for a cut in betting tax but believes that such a move should be accompanied by a fuller discussion of the levy.
Corals is looking at opening an operation in Gibraltar, Alderney or the Isle of Man. Ladbrokes is considering expanding its business in Gibraltar, while William Hill is awaiting approval to set up in the Isle of Man.