Gibraltar Gaming Operators Annoyed by New UK Tax Regime

Gibraltar, a British territory located on the tip of the Iberian Peninsula, is the home of several internet bingo and gambling companies. Most moved to Gibraltar to escape the British taxman. The territory has long been a political sore point for the UK and Spain. Gaming operators in Gibraltar are angered by the British government’s plans to impose a 15% tax on all bets placed at gaming companies located in Gibraltar. Many see the move by the UK government as an unfair revenue grab by the London based government. Historically Gibraltar has had significant autonomy over trade and financial issues including the ability to set tax rates.

Phill Brear, Gibraltar’s gambling commissioner, told reporters that the new taxes would be “clearly against the common-sense logic of electronic commerce.” Brear pointed out that 60% of all bets by UK residents were placed at gaming operators located in Gibraltar. Brear stated “We now hear a lot of talk in the U.K. about creating a level playing field. But you can in fact never level the field between high-street shops and online services.”  The proposed 15% tax is the same tax rate imposed on players that place bets in the UK. Currently Gibraltar levies a 1% tax on gaming operators. The new taxes are set to be imposed in 2014. All companies doing business in the UK will be required to obtain a British gaming license.

Steve Buchanan, who heads the Gibraltar operations of Ladbrokes, noted that the taxes will put “a huge and unwanted cost on our business.” Buchanan added that despite the new tax Gibraltar still has other advantages over Britain. Gibraltar does not levy a VAT tax on advertising. In Britain the tax is 20%. When British operator Betfair moved to Gibraltar in 2011 the company said it would save $30 million annually in taxes. Online gambling is big business in Gibraltar and players from around the world log onto Gibraltar based websites to play online bingo, casino games or bet on sporting events.

Recently business increased when Britons bet on the sex and name for the royal baby. Gambling accounts for 15% of Gibraltar’s $1.89 billion economy and employs about 2,500 people. Currently there are 25 operators in Gibraltar and most have more than one website. The industry has set up a common fund to fight the new taxes in court. Operators say that the taxes violate the EU’s free market rules. Brear warned that the new taxes could send bettors to unregulated websites in the Caribbean. Hugh Robertson, the British minister for sport, tried to justify the new rules and said “These proposals will ensure that British consumers enjoy consistent standards of protection, regardless of where a gambling business is based.”