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The odds on William Hill moving its online and telephone betting business offshore have shortened.
Ralph Topping, chief executive, yesterday said competition from rivals enjoying benevolent tax regimes meant the UK bookmaker did not have "the luxury of being parochial about our future".
Mr Topping was responding to fears in the racing industry, voiced yesterday in public for the first time, that William Hill will lead an exodus of UK bookmakers offshore. In an extensive statement , he told the Financial Times that the online betting market had become much more competitive than five years ago and would become even more so over the next decade.
"We face worldwide competition from 400 or so English-language betting websites," he said. This meant that the group could not afford to take "a simplistic stance on complicated issues".
Horse racing's fears burst into the open when Paul Dixon, president of the Racecourse Owners Association, said William Hill was "very serious about moving".
Mr Dixon told a conference of racing industry leaders that an offshore move by William Hill would almost certainly be mirrored by its rivals. "I believe they are geared up to make this move and, if they do go, how would Ladbrokes and Coral respond to that?" he said. "If this is going to be greatly to the detriment of racing, then the government must do something about it or face the consequences."
Mr Topping told the FT in Apri l that relocation remained a "live issue" for bookmakers because of the lower tax regimes enjoyed by overseas rivals.
Yesterday he went further, pointing out that William Hill was already an international business, and that it had closed 20 shops in the UK this year, while 16,000 staff were on a pay freeze.
While UK bookmakers pay 15 per cent tax on gross profits, rivals such as Paddy Power pay just 1.5 per cent in Ireland.
A statement issued jointly by the Treasury and the culture department said they would be "very disappointed" if leading bookmakers moved offshore.
It added that the culture department was reviewing remote gambling rules to make regulation fairer "and ensure a more level playing field between British businesses and their overseas counterparts".
Mr Dixon said the Treasury stood to lose up to £45m a year in taxation, while the 10 per cent levy bookmakers pay to racing from their profits would suffer a shortfall of up to £30m, if the three leading bookmakers relocated their telephone bets and online businesses.
Although gross profits tax and the racing levy would continue to be paid on profits made in UK land-based shops, the loss of levy revenues from online and credit bets "would be devastating for British racing".
Such a relocation would amount to the bookmakers "sticking two almighty fingers" up to the government, said Mr Dixon. The government replaced betting duty based on turnover to a gross profits tax system in 2001 at a time when competition from overseas operators was intensifying. Mr Dixon said there was a gentleman's agreement at the time that the bookmakers would retain their operations in the UK.
Mr Dixon encouraged the idea of the government retaliating to a possible exodus by threatening to remove or reduce bookmakers' gaming machines from their shops, or forcing offshore operators to pay tax and the levy to transact with British customers and
