The UK government is preparing new criminal penalties for online gambling operators should “the expected high degree of voluntary compliance” with its new tax regime fail to materialise.
The proposals for enforcement action against “operators who fail to, or who choose not to, comply or pay” were published late last week in a formal consultation paper into the UK’s new place-of-consumption (POC) tax, currently set to be introduced on 1 December 2014. Plans to tax online gambling on location of gambler as opposed to company were confirmed in last month’s Budget, following last July’s announcement that online operators would be required to obtain a licence from UK regulator the Gambling Commission to continue transacting with British customers and advertising in the UK.
According to HM Treasury: “For cases where an operator who is required to deposit a security fails to do so but continues to supply gambling to UK customers, it is proposed that a new criminal offence is legislated for.” The government said that this approach, already applicable to VAT, would only be required where remote gaming duties “are at risk of being unpaid”.
The UK government is however not proposing to resort to technical enforcement measures such as IP or payments blocking, suggesting it has taken account of the limited success of these tools in countries such as Italy and France. Instead, the UK is proposing to rely on “mutual assistance agreements with other countries”, new criminal penalties and the withdrawal of operating licences for non-payment of taxes.
In addition, third-party software providers and affiliates will also potentially become liable for payment of duty and enforcement action should they not stop working with a non-compliant operator once they receive a notice of liability from HMRC, on the basis that they are sharing in the profits of that operator.
Outlining the government’s reasons for the introduction of the tax in her introduction to the consultation paper, economic secretary to the Treasury Chloe Smith stated that : “[O]nly approximately 10 per cent of remote gambling carried out by customers in the UK is subject to UK gambling duties.” She added that the payment of taxes on profits from UK customers regardless of where they were located “will level the playing field, providing a fairer basis for competition between remote gambling supplied from the UK and overseas.”
While the consultation paper also stated that “[t]he rate and date of the tax will be kept under review following this consultation and confirmation of the legislative timescales for regulatory reform”, it re-published estimates based on the assumption of a 15% tax on gross win from UK customers. According to HM Treasury, projected tax take under the new POC regime would rise from £70m in 2014-15 to £240m in 2015-16 and £270m in 2016-17.
A Deloitte-authored report commissioned by William Hill, released in January, concluded that setting the new tax at 15% GPT would drive smaller operators out of business and increase the size of the unlicensed offshore market, thus defeating the government’s publicly stated aim to provide better protection for consumers under the new regime and its private desire to raise much-needed taxes from the industry.
Industry stakeholders, including operators, software suppliers, advertisers and trade bodies, have until 28 June to submit their views to the government on the measures proposed within the consultation paper.
