Internet Bingo Regulation in the United Kingdom

The United Kingdom was the first European country to legalize and regulate internet bingo. The basis for the legalization of internet gambling in the UK is the Gambling Act of 2005 and came into full effect in 2007. The act created the UK Gambling Commission which licenses and regulates gambling in the country. Any internet gaming operator with servers located in the UK is required to obtain a license from the Gambling Commission. A Majority of the leading gaming providers obtained licenses in the UK.

One point of contention has been allowing offshore operators licensed in a ‘white list’ jurisdiction to advertise and offer internet gambling services to UK residents. Offshore operators pay much lower tax rates. Many offshore operators are located in countries like Gibraltar, Malta, the Isle of Man and Alderney which have much lower tax rates. That will change this year. The Chancellor of the Exchequer said in his annual budget address that the UK will impose a ‘point of consumption’ tax on all online gambling transactions taking place in the UK. The government is hoping that this will level the playing field and eliminate the unfair advantage enjoyed by offshore gaming operators.

The UK Gambling Commission has three objectives. The Commission is charged with keeping crime out of the gambling industry, making sure that all games are fair and protecting children and vulnerable gamblers from exploitation. The commission also tests gaming software to make sure no cheating is taking place. The Commission established codes of practice that all licensees must follow and enforces compliance with the code. Great Britain has one of the most successful regulatory regimes in place governing internet gambling. The commission works closely with the gaming industry for the benefit of operators and players.

The internet bingo industry is subject to the Gambling Commission’s authority. Currently internet bingo operators located in the UK must pay an annual license and a 20% tax on gambling profits. This makes bingo the highest taxed form of gambling in the UK. All other gambling operators pay a 15% gambling profits tax. The bingo industry has tried to get the tax reduced for several years without success. Recently the government raised the tax on fruit machines which hurt several land based bingo halls. Some land based bingo operators say that fruit machines account for a lion’s share of their gaming profits.

Internet bingo and casino operators are hoping that the new ‘point of consumption’ taxes will eliminate the unfair competitive advantage enjoyed by offshore operators and the government has been working closely with the industry to address further issues.