Major bookies, represented by the Allied Betting Shops Association (ABSA), added their weight yesterday to the campaign to get the betting tax halved to 5 per cent because of the growing threat of tax-free offshore betting siphoning off business. Paddy Power, Coral, Stanley, and Hackett, which together account for 45 per cent of the annual £450 million betting revenue, backed last week's move by the Irish Independent Betting Offices Association (IIBOA) to reduce the 10 per cent betting tax, saying there was growing evidence that big player punters were availing of a 0.3 per cent tax regime on the Isle of Man through the use of telephone accounts.

Although technically illegal, making bets outside the State has become increasingly feasible as companies such as Sporting Index, William Hill, and Offshore Betting advertise their services in Ireland for minimum £50 bets, and absorb the 0.3 per cent tax charge. A spokesman for ABSA, Mr Stewart Kenny, who is also managing director of Paddy Power, said the new developments within the industry were favouring high stake punters, leaving the smaller punters paying the betting tax.

Major bookie organisations would be forced to apply for licences on the Isle of Man, Gibraltar or Alderney if the betting haemorrhage continued.

"If the Department of Finance wants to bury their heads in the sand, we will go there," he said.

Paddy Power has a telephone betting operation in Tallaght, Dublin, which accounts for £10 million of its £150 million annual business but has applied for a licence and secured a premises on the Isle of Man.

Mr Kenny said that the company would not open the new premises if the Minister for Finance, Mr McCreevy, made the tax reduction in December's budget.