British government moves on online betting tax regime

The British government published its long-awaited new online gambling taxation framework Friday, zeroing in on offshore companies wishing to access the UK market following its adoption of a point-of-consumption definition of online gambling.

Offshore companies servicing Brit punters are likely to be hit with around GBP 300 million in taxes, observers noted. And non-compliance could carry jail sentences of up to 7 years, along with heavy fines.

The new rules will be supported by tough enforcement measures, including the creation of new criminal offences, and a requirement to take out secondary licensing with the UK Gambling Commission .

Culture Secretary Maria Miller is expected to introduce legislation when MPs return to Westminster next month to ensure that every gambling website which has UK customers has to have a British betting licence.

Government spokesmen said that all online operators who work or advertise in the UK will have to have to have a British licence to ensure they participate in tackling corruption in sports, provide funding to combat problem gambling and ensure adequate protection of children and vulnerable adults.

Online operators licensed in offshore jurisdictions but accessing the UK market will pay the same 15 percent tax rate as domestic remote-betting companies from 2014, levied on gross profits achieved in the market, which is believed to generate around GBP 2 billion in revenues annually.

“It is unacceptable that gambling companies can avoid UK taxes by moving offshore, and the government is taking decisive action to ensure this can no longer happen,” the country’s Economic Secretary to the Treasury Sajid Javid said.

“These reforms will ensure that remote-gambling operators who have UK customers make a fair contribution to the public finances.”

The shift will affect some of the industry’s largest players, analysts predicted, naming Ladbrokes, Bwin.Party, William Hill and Betfair who all have online operations based in Gibraltar, where a more benign tax regime is offered to gambling companies.

Taxes on online casino gaming operations based in the British territory are levied at 1 percent on gross profit, with fixed-odds betting taxed at 1 percent of turnover. Both are capped at GBP 425,000.

The industry has known that the initiative was coming for the past year or more, with some companies threatening to launch litigation against the British government as introducing laws contrary to European Union principles.

“We knew it was coming … the focus for us now is on trying to get the actual rate of the tax reduced,” Clive Hawkswood, chief executive of the Remote Gambling Association said.

The British government is expected to confirm the 15 percent tax rate in next March’s budget. Land gambling will be unaffected, according to a government statement.