Betting Exchanges Escape Tax Increases

Betting exchanges, with their (often) better odds and the opportunity to make money by laying as well as backing, have been one of the best things ever to happen for punters.

So I was delighted to hear that Chancellor Gordon Brown has resisted pressure from the bookmakers to make exchanges pay more tax, and even make layers on exchanges apply for bookmaking permits.

Exchanges currently pay a 15 per cent tax on the commission they charge winning punters (up to 5 per cent of winning bets), while bookmakers pay a 15 per cent tax on their gross profits.

Bookmakers have long argued that this is unfair on them, and have lobbied hard for exchanges to pay more. After a 12-month review Gordon Brown rejected their arguments, however, suggesting that the current arrangements were "generally working well".

Whatever the rights and wrongs of the bookies’ case, the decision is good news for punters. If exchange taxation had been increased significantly, exchanges would have had little alternative but to increase their commission rates, making it harder for punters to turn a profit. Alternatively they might have opted to relocate overseas (a few months ago Betfair obtained a licence to operate from Malta).

As things stand, the signs are that bookmakers are now accepting that this particular battle has been lost, and many are in fact making use of betting exchanges themselves. William Hill, who have been among the biggest critics of exchanges, recently revealed that they are now hedging bets through the Irish exchange Betdaq. Coral are already using Betfair for hedging, and Ladbrokes look likely to start using exchanges soon as well (probably Betdaq again).

Hopefully we can now enjoy an end to the uncertainty about the future for betting exchanges, and look forward to cuts in commission rates as competition among them starts to bite.