The UK parliament will publish the conclusions of its inquiry into the impact of the 2005 Gambling Act next week, with the regulation of the online industry expected to take centre stage.
The Culture and Media and Sport Select Committee opened its inquiry into the implementation and operation of the Act in May 2011, receiving submissions from stakeholders and interested parties such as bookmakers, online operators, bricks ‘n’ mortar casino and bingo companies and church groups.
With the UK government recently having announced plans to move by December 2014 to a place-of-consumption tax for online gambling and for all UK-facing operators to have a Gambling Commission licence, the conclusions of the parliamentary report, The Gambling Act 2005: A bet worth taking?, are widely expected to back these proposals.
HM Treasury’s consultation period on the design and tax rate of the planned new regime closed on 28 June, with all of the UK’s major online operators understood to have submitted comments. Online bookmakers such as William Hill have consistently argued that setting the tax rate at the current level of 15% of gross profit (GPT) would drive smaller operators into deficit and result in an increase in the unlicensed grey/black market.
Conservative MP Matthew Hancock also recently claimed one of 13 coveted slots for backbench-led legislation for his Offshore Gambling Bill, which also proposes to tax the UK online gaming industry based on location of gambler, not company as under the 2005 Act, alongside compelling all relevant operators to contribute to the Horserace Betting Levy. His bill will receive its second reading on 25 January 2013. Hancock has argued his bill will close the loophole that allows 19 of the 20 largest bookmakers to operate from offshore, avoiding “up to £300m in tax, UK consumer protection laws and tens of millions in levy contributions”.
Previous Labour Chancellor of the Exchequer Gordon Brown’s final act before leaving office in 2007 to set the tax rate at 15% GPT for all online gaming businesses in the UK resulted in Ladbrokes, William Hill and Betfair relocating their online operations to Gibraltar in order to remain competitive against websites targeting the UK off a lower tax base in other EEA Member States, Gibraltar and the UK government’s “white list” of approved jurisdictions.
bet365 and Gala Coral, the only major operators with appreciable parts of their online businesses taxed in the UK, were granted double taxation relief on their sports bets in March’s Budget, “expected to decrease receipts by approximately £20 million per annum,” according to an accompanying statement from HMRC.
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