New Tax Could Jeopardize UK Online Gaming Industry

Internet bingo operators licensed in Gibraltar, Malta and other countries are upset with plans by the UK government to impose a 15% point of consumption tax on all wagers placed in the UK. In the past many bingo and gaming operators located offshore to take advantage of favorable tax regimes. For example operators licensed in Gibraltar only pay a 1% tax which is also capped. A new report commissioned by the Remote Gambling Association says that the proposed 15% tax could do great harm to the internet gambling industry. The report was released by the global auditing firm KPMG.

In its 2012 budget the UK government announced plans to impose the 15% tax at the end of 2014. In their report KPMG said “Rather than undertake a comprehensive review of the tax regime, the Treasury has made minor changes to the current regime and has merely focused instead on extending its application to operators in other jurisdictions who transact with British residents.” In Gibraltar internet bingo and gaming firms have raised over five hundred thousand pounds to mount a legal challenge against the proposed tax.

The report found that the tax would force companies to close their doors forever and hundreds, maybe thousands, of jobs will be lost. They also said the tax could drive “a very large number of UK customers” to offshore duty-avoiding gaming firms as these would offer lower priced products.” This could lead to a similar situation that exists in the US where players are forced to play at untaxed offshore websites.

Remote Gambling Association president Clive Hawkswood talked to reporters and said the following “It is vitally important that the Government does not repeat past mistakes. It needs instead to set rates of remote gaming and betting taxation that give operators a realistic chance of being competitive in what is an inherently international market. This is a challenging time for the industry and we will continue to engage with Treasury to ensure the impact of any tax changes is fully understood by the Government. The online gambling industry is a UK success story and already contributes significantly to UK Plc in terms of jobs, marketing spend and corporate taxes. We do not want to see the Government’s plans put these companies and their investments in jeopardy.”

Hawkwood and others in the online gambling industry are proposing a lower tax rate. Hawkswood told reporters “We argue strongly that any rate above 10 percent GPT is not sustainable in what is a very mature market where consumers already know what level of value and choice to expect. In two reports, Parliament’s Culture, Media & Sport Select Committee has already urged the government to get the tax regime right and it is in the interests of all concerned that HM Treasury takes note of that and all of the evidence which points to a sustainable rate being no higher than 10 percent.” In addition to the new tax offshore operators would be required to obtain a UK remote gaming license.