newexchangeneeded
Market Sharp
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- Jul 5, 2011
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The Betfair share price has dropped from £7.70 on Monday morning to £7.10 as I type -about 8% down. And almost 50% down in a year. Despite the fact that they have offered to buy back 50 million of shares.
Why is this? I hear that Betfair may have failed to pay VAT on around 800 million of commission fees, premium charges and transaction fees, and this is being investigated by HMRC. They have not been charging VAT to customers, and it seems that, because they were not bearing the risk of the bets, just providing a service, they should have charged VAT, unlike bookmakers who bear the risk of the bet - the key case is apparently Commissioners v United Utilities ECJ 2006. In addition questions have been raised over a large number of transactions where the price traded on Betfair bore no resemblance to the real odds, consistent with money laundering - which is what the bookmakers argued might happen very early on. Finally, a number of football, tennis and cricket matches have featured unusual betting patterns, many with the draw backed at odds-on in football pre-event, or tennis matches where the person winning the first set has lengthened. Betfair appears to have done little to report these to the police and SOCA, and log files of the games have been sent to the latter. I must stress that I am not aware of any evidence which proves or disproves the above claims. One example I was shown was Man Utd being matched at a price of 14 pre-event against a weak Chinese team, a match Man Utd won 5-0.
In the United States, when allegations of breaches of regulations and possible complicity in money laundering were made against three poker sites, the DOJ froze assets before the case was proven. I hope that the UK authorities will not do the same here, but it can only have a further adverse effect on the Betfair share price, and loss of confidence among customers. It is not expected that Betfair will be able to charge VAT retrospectively to customers if they are landed with a big tax bill. However, the major layers already seem to be leaving en masse, and Betfair will probably become an "integrated sportsbook and bookmaker".
Why is this? I hear that Betfair may have failed to pay VAT on around 800 million of commission fees, premium charges and transaction fees, and this is being investigated by HMRC. They have not been charging VAT to customers, and it seems that, because they were not bearing the risk of the bets, just providing a service, they should have charged VAT, unlike bookmakers who bear the risk of the bet - the key case is apparently Commissioners v United Utilities ECJ 2006. In addition questions have been raised over a large number of transactions where the price traded on Betfair bore no resemblance to the real odds, consistent with money laundering - which is what the bookmakers argued might happen very early on. Finally, a number of football, tennis and cricket matches have featured unusual betting patterns, many with the draw backed at odds-on in football pre-event, or tennis matches where the person winning the first set has lengthened. Betfair appears to have done little to report these to the police and SOCA, and log files of the games have been sent to the latter. I must stress that I am not aware of any evidence which proves or disproves the above claims. One example I was shown was Man Utd being matched at a price of 14 pre-event against a weak Chinese team, a match Man Utd won 5-0.
In the United States, when allegations of breaches of regulations and possible complicity in money laundering were made against three poker sites, the DOJ froze assets before the case was proven. I hope that the UK authorities will not do the same here, but it can only have a further adverse effect on the Betfair share price, and loss of confidence among customers. It is not expected that Betfair will be able to charge VAT retrospectively to customers if they are landed with a big tax bill. However, the major layers already seem to be leaving en masse, and Betfair will probably become an "integrated sportsbook and bookmaker".
