Analysis: Racing levy reignites betting rights debate

Online operators are facing the issue of paying betting rights on horse racing in the near future, after the UK chancellor yesterday signalled he was considering introducing the measure as a replacement to the horse racing levy.

A sharp reduction in revenue generated by the horse racing levy led the British government to extend the levy to offshore bookmakers while also calling for a consultation into whether bookies should contribute more by paying for betting licences for racing events.

The idea of racing rights has been floated for years but now appears to be gaining traction. In basic terms it would allow a sport’s governing body to charge a licence fee for any bookie wanting to take bets on its events and could theoretically spill over into other sports including football.

Its emergence looks likely in racing given the decline in levy yield, which has also led the government to widen its net to include online operators that have not been paying the rate of 10.75% to UK racing-related revenues.

Paul Bittar, Chief Executive of the British Horseracing Authority, said the levy changes and review of racing rights represent a “major milestone” in its efforts to secure the “future finances” of the horse racing industry.

“For too long we have sought a funding mechanism which reflects the nature of the modern Racing and Betting industries,” he said. “Today’s commitment brings us considerably closer to achieving this goal, and securing the future prosperity of one of the country’s leading sports, and a major employer across the country.”

For bookies facing yesterday’s unannounced increase in FOBT tax, the additional levy payment and potential racing right costs are further cause for concern.

Investec estimates extra levy payments could cost both William Hill and Ladbrokes an additional £7m and £4m respectively.

But income from these additional payments might still not be enough, and skills and enterprise minister Matthew Hancock told the Financial Times it has become “increasingly clear” that a racing rights payment needed to be considered.

The initial announcement contained very little detail and the required regulation would take some time to come to fruition.

In 2011 the House of Commons voted in favour of commercial funding system for horse racing based on the creation of a “racing right” which would be sold to bookmakers to permit them to accept bets, however the idea failed to progress.

At that stage it appeared to target both online and foreign operators avoiding the UK levy, seen by many as an inadequate means of income generation.

However given that the revised levy will now include online operators, an additional ‘racing right’ licence fee would feel like a double taxation.

“I don’t see the point in it,” said one sportsbook executive speaking under the condition of anonymity. “Operators have already paid for the right to take bets on the events by paying the levy based on turnover.”

And while it appears to be focussed on racing for now, there’s a chance the governing bodies of sports such as football and tennis will try to jump on the betting rights bandwagon.

The idea is one thought to be under consideration by English football’s Premier League as a new revenue stream.

News of match fixing in professional football games last year added weight to the lobbying of sports bodies for a Sport Betting Right, which they claimed would more money could be channelled into early-warning systems into illegal betting activities.

At the time the Football Association reaffirmed its desire to have a say over which bets are licensed, highlighting the first yellow card and first throw-in markets as examples open to manipulation and corruption.