New UK Gambling Tax Could Force Some Operators to Close

The new taxes and regulations proposed by the UK government remain highly controversial among gaming companies in jurisdictions like Gibraltar, Malta and others. The British government plans to impose a 15% point of consumption tax on all gambling transactions that take place in the UK.  Operators are less than thrilled with the prospect of higher taxes. Years ago some of Britain’s largest gaming companies relocated to Gibraltar to avoid heavy UK taxes and take advantage of Gibraltar’s favorable tax regime.

A study commissioned by the Remote Gaming Association and done by accounting firm KPMG says that the government’s plans to tax the online gaming industry will not achieve the government’s aims. The current tax proposals will apply to remote gaming and pool betting. Gross profits will be taxed at 15%. In a statement the Remote Gaming Association 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.”

The Gaming Association commissioned the study to test the economic impact of the new taxes and regulations. The report analyzed the merits of the government’s proposal, studies the possible impacts of the new tax and made recommendations of how a workable figure could be identified. The KPMG report said the 15% tax would put several operators out of business. The new taxes could prompt many UK residents to switch to untaxed and unregulated offshore gaming sites. The report stated “There is an industry-held view that a rate of 15 percent is likely not to be absorbed by many online gambling operators. The additional cost presented by this rate of tax can, if at all, only be met by reducing spend in discretionary areas such as marketing or passing on the cost to consumers in the form of higher prices (worse odds). These are likely to reduce the attractiveness of the offer and competitiveness of companies licensed in Britain.”

In the report KPMG said it would be difficult to reverse the damage with subsequent reductions in the tax rate. Clive Hawkswood, Chief Executive of the RGA stated “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.” The new tax could have a chilling effect on several internet bingo operators many of whom are located in Gibraltar and Malta. The new tax could force operators to raise prices which would not sit well with players.