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 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.
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.
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 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 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.”