UK Budget 2016: freeplays become liable for duty

The UK’s bookmakers suffered some unfavourable racing results on the first day of the Cheltenham Festival but the Chancellor George Osborne spared them any further pain in his 2016 Budget on Wednesday. There were fears that he could increase Machine Games Duty (MGD) but the Chancellor did not announce any further increases. 


Those firms with online casinos, poker and bingo rooms, however, did see a further hit to their profits following on from the UK’s point of consumption tax.

The Chancellor has moved to end the differential tax treatment afforded to “freeplays” given as promotional bonuses to players. The Budget report states:
Remote gaming operators currently benefit from a more generous tax treatment when they offer discounted or free gambling (‘freeplays’) to customers in Remote Gaming Duty than would be the case for operators offering free bets on things like football and horseracing. The government will therefore amend the tax treatment of freeplays in Remote Gaming Duty to bring it into line with the tax treatment of free bets in General Betting Duty.

Freeplays relate to the scenario whereby players can play a game without having to place a stake or if the stake required is less than would be ordinarily payable.

Free bets on sports were already liable to tax under General Betting Duty because UK betting shops are already liable for the tax and the government did not want to create a discrepancy with online sports betting.

The Treasury forecasts this could bring in some significant additional tax revenues. In the four tax years between 2017/18 and 2020/21 it estimates a total of GB£ 345 million could be collected, all of which would come from the operators’ profits.

GBGC’s Director Lorien Pilling commented, “internet gaming operators have already been struggling to mitigate for the impact of the UK’s point of consumption tax in 2015. Operators have a bit of respite until this new tax hit comes into force from August 2017 but it is still further pressure on profits.”

Gambling regulation – what does it cost?

Paddy Power has been found to have failings in its responsibilities under the anti-money laundering controls and has agreed to contribute £280,000 to social responsibility causes and ‘share lessons’ with the industry.


In previous GBGC newsletters I have highlighted that the negative publicity attached to problem gambling is likely to cause a decline in gambling overall. The Drink Aware campaign on the misuse of alcohol, along with negative publicity on binge drinking, has caused a decline in alcohol sales of 16% over six years.


Add to this the increases in taxation on gambling and a deluge of regulation throughout Europe and it is fair to say the gambling industry is finding life rather tough at present.
I hope the industry has priced in the cost of regulation, the effect of the press campaign against it, and rises in taxation. I am sure not everything has been fed into the economic model.
The Bank of England imposes stress tests upon the banks that take the form of various factors that could affect the economy and thus the liquidity of banks and the ability to meet their obligations. Tests such as:

• Vulnerabilities stemming from the rest of the world
• A deflationary macro environment
• An adverse constellation of shocks to the housing market

In 2015, according to the Bank of England, five of the seven banks passed the tests but two did not.

The question I asked of the Gambling Commission through a Freedom of Information Enquiry was:

Can you please supply me with your cost benefit analysis, and/or your financial impact study for the Gambling Commission’s Social Responsibility Policy in relation to the effect on the gambling industry?
The reply:

I can confirm that the Commission does not hold the information you have requested. The Commission is not obliged to conduct a cost benefit analysis on changes to our regulatory framework. We do however consider, as a Hampton based regulator, such matters as proportionality and the foreseeable impact through consultations, ongoing conversations with Trade Associations and so forth.
In relation to your second question regarding financial impact, again, we are not currently obliged to conduct such an analysis. However, as you may be aware, the Enterprise Bill is currently going through final legislative steps and, as drafted, the Commission will in future be obliged to conduct an assessment of the impact of regulatory changes. We understand that the methodology for this assessment is still under development by BIS.

The inference is that policies are delivered to the gambling industry without any formal rigour other than a consultation with the trade associations as to the cost to the industry. Yet most government departments do follow a routine of formulating an opinion of the impact when imposing conditions to trade on other industries.
The UK government does have various templates for conducting impact assessments for government policies. It should be of concern to the gambling industry that regulation, taxation, anti-money laundering and social responsibility measures are being imposed without telling the industry the potential cost. The industry needs to know so that it can adjust and prepare accordingly.

Impact assessment template for government policies
https://www.gov.uk/government/publications/impact-assessment-template-for-government-policies


by Warwick Bartlett

Lodha report recommends Indian betting regulation

In July 2015 Chief Justice Lodha was appointed as the head of a three-person committee to investigate the reform of cricket in India and the sport’s administrator the Board of Control for Cricket in India (BCCI). At the start of January 2016 the Lodha Committee published its report.


The report makes numerous recommendations to regain the “purity of the game” of Indian cricket, which has been hit by scandals and corruption, spot fixing. One key recommendation is to legalise betting on cricket. The report states that betting should be restricted to licensed “betting houses” and betting would not be permitted for cricket players, officials and administrators. Players would also be required to disclose their assets to BCCI to ensure they do not bet .

The Supreme Court has been stern in its statement to the BCCI that it should accept and implement all of Judge Lodha’s recommendations for cricket.
“Your members have been wielding power for too long… There will be no second innings here,” Chief Justice of India Tirath Singh Thakur warned the BCCI.

But at the start of March 2016 the BCCI filed its reply to the Supreme Court, saying there are practical difficulties in complying with the committee’s findings.
A regulated cricket betting market in India would be attractive to sportsbooks, given the obsession with the game in the country. But the response to the report by the BCCI shows that regulation will not be a quick process.

UK EU Exit: Spain would demand Gibraltar back

Spain has inevitably used the UK’s EU referendum to bolster its argument that it should take back control of Gibraltar, home to many of Europe’s leading e-gaming firms.
The interim Spanish Foreign Minister Jose Manuel Garcia-Margallo stated in an interview that Spain would “be talking about Gibraltar the very next day [after the referendum]” if the UK votes to leave the EU in June.


Gibraltar is well-used to this posturing by its neighbour and a statement from the Gibraltese government said in response: “The declared intent of the caretaker Foreign Minister of Spain to bring the question of Gibraltar to the fore in the event of the UK and Gibraltar leaving the EU confirms the analysis that has already been made. It is safer and more secure for Gibraltar to remain in the EU in order to deny Mr Margallo the opportunity to pounce on us.” 


At present the border between Spain and Gibraltar is not within the EU Schengen Area because the UK itself has opted out of the borderless Schengen Area. There can be delays of several hours to cross the border at peak times.
Spain ceded Gibraltar to the British as part of the Treaty of Utrecht, signed in April 1713 after the War of Spanish Succession.
The betting suggests that the UK will remain in the EU (1/3 with William Hill) rather than vote to leave (9/4). But in the event that the odds are upset in June, you can bet the Spanish will not let the issue of Gibraltar drop.

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