The internet gambling sector in the UK is one of the most fiercely competitive and open markets in the world. There is no limit on the number of licences, all gambling activities are permitted – from betting exchanges through to live dealer casino games – and gambling firms can advertise their services in print and on television. All of this was permitted by the Gambling Act 2005, which took quite an enlightened attitude towards regulating internet gambling. But the nature of the UK market could be changed by the new Gambling (licensing and advertising) Bill announced in the Queen’s Speech in May 2013.

One of the strengths of the UK Gambling Act 2005 was that it recognised the internet gambling licences issued by certain other jurisdictions such as Gibraltar, Malta, and the Isle of Man. This meant that operators licensed in those jurisdictions on the ‘white list’ would be able to operate and advertise in the UK. The advantage was that it enabled firms to remain ‘offshore’ from the UK and not be liable for the UK’s 15% remote gambling tax, which was the main weak area of the Gambling Act. But the proposed Gambling (licensing and advertising) Bill will bring this situation to an end. 

The overall aim of the new Gambling Bill is to introduce e-gaming taxation based on a point of consumption scenario. To this end, operators wishing to take money from UK-based customers will have to hold a licence in the UK and will pay the UK rate of gambling tax on their gross win from UK players. It will still be possible for firms to be located offshore under the proposed regulation if they hold a UK licence. The Gambling Bill effectively ends the ‘white list’ arrangement, although white list licence holders will not have to go through complete relicensing process by the UK Gambling Commission.
The new bill is being promoted as offering better protection to the customer, an argument that has been used across Europe for the new internet gambling legislation that has been passed. But the UK government can’t help but notice that the Gambling Bill will bring in some extra tax revenues too. 
GBGC calculates that UK gamblers spent GB£ 1.72 billion on internet gambling in 2012. The majority of this spending was with companies based offshore and not liable to UK gambling tax. Under the new regulatory set up the UK government would have collected some GB£ 260 million in gambling tax, assuming a rate of 15%. By the time the new bill actually comes into force in 2014/2015 the amount the government will collect in gambling tax will be approaching GB£ 300 million. Such an amount will not solve the UK’s debt problems but it is a useful contribution and is a tax that is fairly easy to collect.
Prior to moving their operations offshore, the likes of William Hill, Ladbrokes, Betfair, and Coral all ran successful internet sports betting divisions from the UK under the 15% tax rate. Bet365 still does so, as one of the only major betting firms that has not moved offshore. 
What is less certain is how online gaming – poker, casino, and bingo – will fare under the 15% rate. Few companies have ever run their internet gaming services from the UK.
The evidence from other countries around Europe is that the likes of internet casino and poker do not thrive in high-tax set ups. The markets in France and Italy can hardly be described as great successes for many of the operators, although they are doing a good job of collecting tax for the respective governments. 
The original model for internet gambling was based on low taxation and a high payout to the customer. The reason that the UK became such a competitive and successful internet gambling market was precisely because it allowed operators to work to this model and advertise their services.
The UK is too important a market for many operators for them to choose to leave or opt out when the new regulation is enforced but it will alter the reason for being in offshore jurisdictions for certain groups of operators
GBGC understands that under the new Bill revenues from non-UK based players will not be taxed by the UK government under the new arrangement. A point of consumption tax, rather than a country of origin tax, suggests that a UK-licensed gambling company will, therefore, not be required to pay gaming tax on revenues from players in the likes of Asia. So, for those companies with very few UK-based customers but who wish to sponsor English Premier League teams to advertise to their Asian-based customers, the new UK setup could look quite attractive to them.
In Gibraltar it is reported that the Gibraltar Betting and Gaming Association (GBGA) has created a legal ‘fighting fund’ to try and get a judicial review into the proposed UK regulatory changes, which would have an impact on the business model of many of the Rock’s key licence holders. Earlier this year the GBGA made a submission to the House of Commons Culture, Media and Sport Committee in which is said: “In the event that the Government determines to proceed with the proposed legislation and fiscal reforms, the GBGA will regrettably have little alternative but to institute judicial review proceedings to challenge these measures.” This statement was made before the new Bill was included in the Queen’s Speech, so presumably the GBGA’s challenge will now take place. 
The GBGA believes that the UK government’s proposals are unlawful and set out its arguments in its written submission to the committee:
The proposed measures both separately and together with the related changes to the tax regime for online gambling are unlawful in terms of EU, national and international law and are liable to successful legal challenge.”
“Absent some cogent evidential and rational basis for the change, EU law will not permit the UK to arbitrarily switch from a free market system that it specifically set up and reinforced in the Gambling Act 2005 to a significantly more restrictive regime that takes no account of licensed operators established and regulated within the EEA. It is a well established principle that where trading and fiscal rules are to be changed, the compatibility of any new rules with EU law must be examined in light of the pre-existing regime.” 
The regulatory regime for internet gambling under the 2005 Gambling Act has worked well for both operators and customers. It has fostered a competitive, open market with little need for customers to seek out ‘unregulated’ gambling, as has happened in other markets. One of the problems with government being overly keen to introduce new regulation is that it can have unintended consequences that ruin a system that was working well. There is a fear that the Gambling Bill could have exactly that result for the UK’s internet gambling sector. 

Gambling (licensing and advertising) Bill Summary 
1. The stated aim of the Bill is to give the UK consumer greater regulatory protection. 
2. It will introduce regulation and taxation at the point of consumption rather than the country of origin. 
3. It will mean all operators or advertisers of internet gambling in the UK market will have to hold a UK Gambling Commission licence. 
4. The current rate of remote gaming tax in the UK is 15% of gross profits. 
5. The likely date of implementation for the Bill is Q4 2014 but could be as early as Q2 2014