UK point-of-consumption gambling tax a ‘seismic shift’ for the industry?

Quoting a number of industry analysts, CNBC claimed at the weekend that online bookmakers are moving into Europe and Australia to offset potential losses from an upcoming U.K. gambling tax, which could cause a “seismic shift” in the industry.

The end-2014 introduction of the 15 percent tax and secondary UK licensing on all internet gambling firms wishing to access the British punter will hit major U.K. bookmakers like William Hill and Ladbrokes, which operate online gambling divisions from Gibraltar, where taxes are currently levied at 1 percent and capped at GBP 425,000, CNBC noted.

And it could change the make-up of the gambling industry, with smaller bookmakers potentially forced out of the market, analysts opined.

David Jennings and Simon McGrotty, gaming analysts at Davy Research, said in a research note: “The introduction of the POC tax is likely to cause a seismic shift in the competitive landscape of the U.K. online gaming market.”

Widespread media reports over the past few months as the advent of the new UK regime looms larger have revealed that major gambling groups based in former “white list” jurisdictions like Gibraltar, Isle of Man, Alderney and Malta are lobbying for a more reasonable tax rate and threatening to fight the new laws on grounds of non-compliance with EU principles .

Several reports have it that Gibraltar-based online firms have contributed to a half-million pound war-chest if litigation becomes necessary.

But there may be other ways to reduce the impact of the new tax.

“According to research from Citi analysts James Ainley and Josh Lipman, bookmakers may be able to offset the impact of the tax hit by around 70-to-80 percent,” CNBC reports.

Apparently this can be achieved by relocating to Europe or Australia and diversifying earnings streams to help mitigate the POC tax.

In this regard Europe, particularly Italy and Spain, could be attractive due to its large market size, high propensity to gamble, favourable taxation and low penetration of online gambling to date.

But Australia may be a good option too, because about 85 percent of the market is dominated by three players, compared with the U.K., where the top five companies account for 55-60 percent of the market.

In Australia, the sports betting market is growing at 3-to-4 percent per annum, one analyst pointed out to CNBC, noting that William Hill and Paddy Power have already established strong online presences in the region.

David Jennings of Davy Research said that although the Australian government has banned online casinos, poker and live sports betting, there was a good chance that such regulation could soften.

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