The British government is serving notice that gambling operators taking bets in the country over the Internet will no longer enjoy the shelter of their offshore tax havens.
Ladbrokes, William Hill, Bwin.party and Betfair are among the industry giants affected by a new point-of-consumption tax equal to 15% of gross revenue that takes effect in December 2014. The rate is about the same as that paid by onshore operators, and estimates are it could cost the offshore segment £300 million (US$465 million) a year based on a market valued at roughly £2 billion.
“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,” Economic Secretary to the Treasury Sajid Javid said.
The tax is incorporated in new legislation that will require all UK-facing operators to hold a license issued by the Gambling Commission, bringing to an end the so-called “white list” that allowed offshore operators to market their services in the UK. Violators will face unlimited fines, prison terms and license revocation.
The last decade has seen almost all of the country’s major bookmakers and gambling operators move their online businesses to Alderney, Gibraltar, the Isle of Man and as far as the Caribbean to take advantage of tax rates ranging as low as 1% in some jurisdictions to an effective 0% in others.
“We knew it was coming,” said Clive Hawkswood, chief executive of the Remote Gambling Association, a trade group representing the industry. “The focus for us now is on trying to get the actual rate of the tax reduced.”
Gibraltar, however, is reported to be incensed at the plan and is considering an appeal to the European Commission. William Hill, which has the largest share of the UK online market, also has said it may challenge the tax as a breach of EU competition law.
Operators have until 30th September to comment on the legislation.
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