Chancellor of the Exchequer Signals Tax Changes

In a move that is sure to be closely followed by the online bingo industry Chancellor of the Exchequer, George Osborne, will start the ball rolling on the Treasury’s tax grab for offshore gaming sites. Last week heritage minister, John Penrose, addressed the very same topic and sent stocks for offshore bookmakers plummeting. Penrose said that every any company offering gaming to British punters will have to obtain a license from the UK Gambling Commission. Many see the policy as a precursor for the UK government to levy taxes on offshore gaming operators including internet bingo sites.

Neither Penrose nor Osborne have provided a detailed outline of the new policy but most believe that the announcements will lead to formal proposals and tax rate changes. A lobbyist for the horse racing industry stated “The statement will mean that this will be part of Treasury legislation. There is going to have to be a level of consultation in all of this but I would have thought that [the statement] will mean that the topic will end up being worth four sentences in the chancellor’s budget speech next year.”

At the present time offshore gaming operators pay no UK taxes while gaming companies located inside the UK pay a 15% gross profits tax and corporation taxes. Gaming operators located in the UK claim they are also hampered by VAT taxes. Several options are open to the Treasury. One option is to make offshore operators pay the current 15% tax rate. Most UK based gaming operators will probably lobby for a reduction in the tax rate to about 10%. Should the tax rated be reduced one major gaming operator indicated that they would repatriate their operations to the United Kingdom.

The government is selling the move as being for player protection but not many in the industry actually believe that. Richard Stuber, a JP Morgan analyst, stated “While the [DCMS] statement is likely to focus on player protection, rather than tax [a Treasury issue], we believe the key proposed change will be a move from recognising supply to recognising demand from a regulatory standpoint. We believe this could be the first step to creating a tax footprint for UK operators regardless of their corporate domicile.”

The move is bound to affect the internet bingo industry. There are many offshore internet bingo sites targeting players in the UK. How this will affect jackpots, bingo bonuses and promotions is anybody’s guess right now.