by Ryan D. Jaeger
Patrick Kennedy, the Chief Executive Officer of Paddy Power announced
this week that the Irish group may need to follow the lead of English bookmakers
Ladbrokes and William Hill, and move their operations offshore.
This is because the tax burden in Ireland is so tough that the group is
finding it hard to increase its profits year on year.
Paddy Power reported a 15% drop in pre-tax profits for 2009 to €67.2
million.
Kennedy said that despite the current drop in profits, it still expected to
increase its workforce by an extra 250 people in Dublin, bringing it to a total
of 900.
The tax regime in Ireland is one of the biggest obstacles for Paddy Power to
continue growing in terms of profits, and the group is eyeing new plans by the
Department of Finance to impose further taxes, with trepidation.
Kennedy said that if the 1% turnover tax was imposed, a further €2.5
million would be shaved from its profits.
As such, Paddy Power is not ruling out the possibility of taking its
operations offshore to more tax friendly locations such as Gibraltar.
"This is a very competitive, cut throat market," said Kennedy. "The gap
between doing well and underperforming is very, very narrow. You can't take too
many structural impediments to your cost base, and that could lead to the
tipping point."
Kennedy stressed that the company was not looking for a reason to leave the
country and said that the group retains a "strong commitment" to Ireland.
The financial report showed that Paddy Power invested over €10 million
more on advertising in 2009 than it did the year before.
In terms of its internet gambling arm, Paddy Power posted profits of €45.7
million - 7% up from the previous year.
