The UK can now forge ahead with plans to regulate and tax online gambling in Britain based on location of consumer, rather than company, after the European Commission standstill on its Draft Gambling (Licensing & Advertising) Bill ended today.
The licensing and regulatory regime mapped out by the bill could be in place as early as April 2014, ahead of the previously announced December 2014, should the bill secure a third session slot in Parliament, according to the Department for Media, Culture and Sport’s top civil servant Jonathan Stephens last week.
Passage of the bill would compel all operators transacting with British consumers and advertising in the UK to obtain a licence from the Gambling Commission to continue doing so. The expiry of the standstill period set aside for the EC’s review of the licensing and regulatory proposals also paves the way for HM Treasury to confirm the accompanying tax on all revenues generated by British customers, projected at 15% of gross profits.
The conclusion of the notification procedure at European level is however, in the words of EU regulators, “without prejudice to any possible legal steps that the Commission might decide to take in the future regarding the same measure, once adopted.”
Offshore egaming hub Malta also challenged the compliance of the measures with EU law in a detailed opinion which forced a month’s extension to the standstill period. As an EEA Member State, operators licensed there are currently able to target British consumers and advertise in the UK from a lower tax base, as are those based in Gibraltar and jurisdictions on the UK government’s approved White List.
The eight-page complaint challenged the UK’s proposed changes to its regulatory regime on three fronts: the requirement of a national licence constitutes a restriction of the freedom to provide services under the EU Treaties; the lack of evidence and consistency in UK gambling policy; that the collection of tax for the state “cannot be relied upon to restrict the freedom to provide services in the internal market.”
The Gibraltar Betting and Gaming Association, which last year raised a £500,000 legal fighting fund and counts most of the UK’s leading online operators among its 24 members, said in January that it would initiate legal proceedings if the UK decides to proceed with taxing and regulating online gambling in Britain based on the location of gambler, not company.
While HM Treasury has yet to confirm the tax level, its modelling assumes a continuation of the present rate of 15% GPT. Following the offshore exodus to Gibraltar of Ladbrokes, William Hill, Betfair and Gala Coral in recent years, Bet365 now stands alone among the UK’s leading online operators in paying this duty, but has benefitted from double tax relief since April 2012.
Gambling Commission CEO Jenny Williams and DCMS’ top mandarin Jonathan Stephens consistently struggled during MPs’ recent pre-legislative scrutiny of the bill to identify problems with the current system. As raised by Malta’s complaint, EU law requires re-regulation of gambling by Member States to be justified in terms of providing enhanced consumer protection; not for the sole purpose of raising taxes.
Article written by Stephen Carter
