Steering a calm course through choppy seas
The chairman of Horse Racing Ireland feels it’s vital that racing gets a cut of the off-shore profits from gambling, writes BRIAN O’CONNOR
ANY FRANCOPHONES in the Department of Foreign Affairs might soon find themselves seconded to the Departments of Finance and Justice to inadvertently play a crucial role in the salvation of Ireland’s racing industry.
Ever since Taoiseach Brian Cowen announced that the Government will this year start to tax off-shore bookmakers and give the money to a cash-starved Horse Racing Ireland (HRI), there has been speculation about how such a system will work.
In reality a model is already in place, put through the French parliament in April and waiting, it seems, for some civil servant linguist here to translate it into the sort of judicial jargon that approximates English. The other bits that will have to be changed are the figures. When the French authorities legislated for online betting, they put in the sort of licensing system that guaranteed a massive eight per cent of tax raised on turnover goes to French racing, with a smaller percentage reserved for other sports that might have generated income on gambling as well. The figures added up to a good deal for racing while being so unattractive to foreign bookmakers that the betting exchange Betfair decided not to bother with the French market.
The challenge for the Irish authorities is likely to be creating a fundamentally similar system but with tax rates that encourage the likes of Betfair, Ladbrokes and all the other bookmaking giants into wanting to operate here while generating enough levy to revitalise a racing industry severely weakened by budget cuts in the last year and a half.
"Without trying to be alarmist, the industry, and racing itself, can’t take much more of what has happened in the last 18 months," says HRI chairman Denis Brosnan.
"Everyone knows the position the country is in and that pain has to be taken. But there comes a time when you can’t take any more pain, and racing, and the thoroughbred industry, is certainly there now."
That year-and-a-half of cuts, which has seen funding cut from €76 million to €59 million, with an estimated 2,000 jobs lost, has racing grabbing at the Taoiseach’s announcement of a guaranteed funding structure the way a drowning man grasps at a lifebuoy.
Legislation has to be in place before the Budget towards the end of this year, and Brosnan is happy the process can be completed with a minimum of fuss. He insists the details of such legislation are a matter for Government, but Brosnan’s happiness will be proof enough for many that the broad thrust of HRI’s funding ideas has been accepted. And for HRI ideas, read the chairman’s.
The man who built Kerry Group from virtually nothing will finish as HRI chairman next year, a full 20 years after first taking on the onerous job of leading Irish racing.
In that time, the ruling body’s titles have changed, from the Racing Board to the Irish Horseracing Authority and now HRI. And yet Brosnan has been the constant figure at the front, fighting the unpaid fight for an industry that can polarise popular opinion like few others.
Whatever the merits of racing’s close funding arrangements with various governments, and the envy and bitterness that generates elsewhere, no one doubts the effectiveness and the influence Brosnan brings to the task.
The man whose business acumen remains as renowned as the intensity with which he pursued success has lobbied for racing so successfully that any bookmakers hoping to hang on to tax-free, off-shore profits must have known the game was up earlier this year when Labour, of all parties, advocated taxing off-shore companies and giving the income generated to racing.
"It was certainly a boost for morale," is all Brosnan will say about that particular coup.
The statement is delivered with the crispness of language that is as much a Brosnan trademark as the pursed-lipped devotion to business logic that saw him retire from the Kerry Group in 2001 after fulfilling the task of turning "milk into money" – an estimated €2 billion worth of money.
The previously jet-black hair is more peppery now at 65, but there remains, if not quite "something of the night" about Brosnan, then a mildly Gothic vibe that must occasionally play to his advantage around the boardroom table. Arguing for racing, he says, is different.
"I have always said if racing’s case doesn’t stand up, then we simply can’t go round with a begging bowl. We have always presented the case in a simple, rational and professional manner. The case must always stand up. And it does," Brosnan declares.
The case against that case has in the past centred on how much of the Government funding has gone to prize-money, which in turn goes to owners who by definition are not short of a bob.
Brosnan summarily dismisses the criticism, and, with the sort of cross-party support HRI now has, it appears he is not alone. In fact, the one sector not now fully on board is the bookmakers.
HRI’s chairman argues that the line articulated by Paddy Power about an equitable taxation system for all is one he agrees with.
"There’s little point losing two or three hundred jobs in Tallaght and saving two or three hundred in Co Cork. We must try and save jobs everywhere."
And the foundation of that is to get racing’s funding set up properly, with a percentage of online and telephone betting turnover – currently estimated by HRI at €1.5 billion – plus the granting of licences to trade in Ireland that will be calculated in terms of millions of euro rather than thousands.
"In simple terms, if a company is taking bets from an Irish citizen, they must be licenced to do so. And if they aren’t, they won’t be allowed to advertise in this country, to use credit cards or to seek clients.
"That’s the basic legislative concept embraced by countries who have decided to act. The country that has most recently protected its industry is France. And the French model is one we like," Brosnan says.
"Obviously it has to be a balancing act for the Departments of Finance and Justice in terms of the cost of licences, penalties associated with it and what is needed to support the industry.
"There will always be loopholes. People can always act outside of the law. The majority of people, though, are happy to live within the law. Major multi-national companies, in order to trade and protect their good name, have to trade within the laws of the country they are trading in," he adds.
Bookmakers reckon the figures going off-shore are half of HRI’s €1.5 billion estimate, although Brosnan counters that the bookies’ figures don’t include half-a-dozen of the main players. But a one per cent turnover tax on that figure, plus existing receipts from within Ireland, along with a licence fee on the top 10 betting companies, could take HRI’s funding back to pre-recession funding levels.
In the political and economic conditions of Ireland right now, that would be some result.
But in terms of jobs, and the worldwide influence that the Irish horse industry exerts, Brosnan’s arguments have clearly converted all the main political parties.
With his term of office due to end next year, a guaranteed funding system would be some legacy to leave behind, but the Kerryman living in Limerick takes nothing for granted. A similar euphoria existed after the establishment of the Horse and Greyhound Fund in 2001, only for the foundations to creak. And rare is the figure within racing who can rely on general approval.
Brosnan’s ability and energy in fighting racing’s corner is widely acknowledged, but he is also regarded as being close to Coolmore Stud’s John Magnier and JP McManus, something that doesn’t endear him to everyone. The three men have been involved in business together.
Brosnan’s Croom House Stud has also had yearlings bought by Magnier, including Zoffany, one of the best two-year-olds seen out in 2010 and a prime prospect for Royal Ascot later this month.
Paddy Power have pointed out how only 11 per cent of their turnover is on Irish racing and object to the sector being pledged all future revenue from gambling of any sort.
If Zoffany runs at Ascot, however, his breeder suggests that any betting on him will reflect the international nature of gambling in 2010.
"Every country, including France, recognises how the horse industry is an international industry. If an Irish horse runs in Dubai, Irish people will bet on it. If an Irish horse runs in the Breeders’ Cup, people will bet on it. So why not pay a levy?" Brosnan argues.
As for betting revenue generated on other sports being eventually used to finance those same sports, he believes that is something HRI can hardly oppose if the situation ever develops. But racing is the immediate priority.
"I came up through the agricultural scene and the dairy industry is now worth only half what it was in the 1990s. Pig meat products are now imported here from Denmark, Holland and other countries. Maybe I could persuade better than anyone, with my life in rural Ireland, that please, don’t let another industry go," he says.
Against the odds the Horse Racing Ireland chairman looks to have persuaded the political powers to take drastic action to prevent that happening. And the mechanism for doing so might even have a French accent.
Denis Brosnan on:
Racing’s difficulties:
‘There has been massive decline in the last two years. Another year or two of that and we will find ourselves way down the ladder in the thoroughbred sector."
Closing racecourses:
‘I am strongly of the view there are too many tracks in this country, but if you ever decide to close any of them, the whole political system will come on top of you. You will be told you can close a track, but not on my back door. It would probably be more difficult than it would be to close the local Post Office."
Falling attendances:
‘1.5 million went racing in 2001-02. Now it is 1.1 million. There is nothing we can do about that. All sporting and leisure organisations are suffering. The reality is that people don’t have the same money as three or four years ago. But those people will come back."
Racecourse admission prices:
‘I don’t have a figure of what is acceptable but I do know that what is being charged today is not acceptable. We (HRI) have sat on top of every racecourse for the last 12 months, saying there must be better value, and we are beginning to see a trickle-through. We have used a lot of carrot – and a lot of stick."
On-course bookmakers:
‘I hope and think there is a future for them. Their competition is the bookmaking chains and the exchanges. Punters can now sit at home, get live television pictures and place bets over the phone or on computer. We’ve seen the ring decline.
"But it is not the public, the racegoer or HRI that is putting on-course bookmakers out of business. It is the system that has been allowed to develop whereby huge amounts of money are going off-shore."
