THE BUDGET betting-tax increase will cost listed bookmaker Paddy Power between €9 million and €10 million next year, according to a group statement.

Minister for Finance Brian Lenihan said in his Budget speech that he intends doubling the tax on licensed bookmakers to 2 per cent on turnover from January 1st.

In an interim management statement yesterday, Paddy Power plc, the country's biggest bookmaking chain by turnover, predicted that the new charge will knock between €9 million and €10 million off its operating profits next year.

The tax effectively means that bookmakers will have to pay two cent on every €1 wagered with them, as opposed to the one cent they now pay. They cannot pass on the charge to their customers.

The tax will apply only to bets placed in bookmakers' shops in the Republic, from where most of the company's retail business comes.

It will not apply to its on-line and telephone betting businesses as these are not based in Ireland. Around two-thirds of the turnover in these divisions comes from the UK.

Since the Minister announced the move last month, bookmaking industry organisations have warned that it will result in small chains closing with the loss of between 200 and 600 jobs.

The industry has also argued that it will not generate the extra €40 million expected as retail turnover is falling.

Paddy Power said yesterday that its retail turnover fell 9 per cent year-on-year in October as the recession began to hit its retail customers.

Paddy Power's statement said that it is on track to achieve underlying operating profit of €75 million this year.

"Such an outcome would translate into earnings per share growth of some 10 per cent over 2007, notwithstanding that sterling depreciation is expected to reduce operating profit by approximately €5 million this year," it said.

Paddy Power's share price fell by more than 6 per cent to €12.20 yesterday.