UK Government Ready to Offer Tax Cuts to Offshore Internet Gambling Operators

In December 2012 the UK Department for Culture, Media and Sport (DCMS) published its proposed legislation dealing with the taxation of internet gambling. The draft legislation required all operators that advertise and take wagers from the UK to obtain a license and pay a tax on all wagers originating in the UK. The tax, commonly referred as a ‘point of consumption’ tax would tax all online gambling transactions. The law would also do away with the nation’s ‘whitelist’ a list of approved operators allowed to advertise their services and products in the UK.

Ralph Topping, the chief executive of online gaming giant William Hill has warned the government that it is in danger of  “stepping on a minefield”  with the proposed changes to UK online gambling laws. Topping was reacting to proposals that would change the way offshore gaming sites are taxed in the UK. Because of high taxes several internet bingo and gambling companies left the UK and set up shop in more favorable tax environments such as Gibraltar or the Channel islands. Topping described the proposed changes as ‘unfair’ and an example of “different departments doing their own things”. Despite the threat of losing the tax benefits of Gibraltar there is not “a chance in hell of us coming back from Gibraltar.” Topping added that Gibraltar is “the hub for online gambling activity in Europe” and also said “The [UK] government will have to get their thinking caps on if they are going to make the UK more attractive to these technology companies.”

In a surprise move it appears that the British government is set to offer a tax cut to internet gaming operators. According to unnamed government source the UK government plans to lure lucrative internet gambling companies back to the UK with generous tax breaks. Recent reports indicate that the Treasury is ready to slash tax rates to encourage internet gambling companies back to the UK. Although the percentage at which the government will reduce the tax remains unknown some sources say taxes could be cut by a third.

A tax reduction of 5% would save the 20 largest offshore gambling companies as much as £100 million annually. Many internet gaming companies located in tax havens would still be unwilling to pay the reduced tax rates. For some a 10% tax rate would be enough to lure them back to the UK. High taxation rates have long been a thorn in the side of internet gaming operators. Some experts say that by moving back to the UK under the control of the Gambling Commission new players will feel safer and more inclined to try online gambling. A government source told the Mail that the Treasury is close to accepting the argument that tax rates on internet gambling should be slashed by a third.