Government tax plans for online gambling will be undermined if they set the rate at more than 10% of operators’ gross profits, a KPMG-authored study has claimed.
According to lobby group the Remote Gambling Association which commissioned the report, KPMG’s analysis makes three strident claims regarding the currently proposed 15% rate: it will force operators out of business or into the grey market, push customers to tax-avoiding offshore operators and result in damage to the industry which will be difficult to reverse at a later date by lowering the tax rate.
CEO Clive Hawkswood said his organisation, chaired by Bet365 co-CEO John Coates and which includes all the leading UK-facing operators and providers such as Ladbrokes, William Hill, Betfair, PokerStars and Playtech, continued to make the case to the government that any rate above 10% GPT “is not sustainable in what is a very mature market where consumers already know what level of value and choice to expect. “
The RGA also argued that HM Treasury’s failure to undertake a full review of the potential impacts of extending the current 15% rate to all UK-facing operators located overseas ran the risk of causing long-lasting damage to a “UK success story”, which already contributed significantly to the UK economy in the form of jobs, ad spend and corporate taxes.
Paddy Power, which generates more than 75% of its profits online, said last month that a 15% levy would have cost it €20m during H1 had it been in place.
The full KPMG report, which reiterates the views of Deloitte in a study it authored for William Hill during last year’s government consultation on the new POC regulatory regime, has been submitted to the government.
William Hill boss Ralph Topping recently refused to completely rule out legal action over the UK’s proposals to move to a tax model next year based on location of consumer, rather than company.
The Gibraltar Betting and Gaming Association, whose members include all the UK’s major online operators with the exception of Paddy Power, also threatened to initiate legal proceedings if the tax was introduced, raising a £500,000 legal fighting fund from its 23 members. This threat has yet to materialise however, despite Treasury last month confirming plans to levy a 15% rate on operators’ gross profits from UK consumers by December 2014.
Based on data specialist H2 Gambling Capital’s estimates of a UK onshore and offshore-regulated remote industry worth £2.064 in gross gaming yield in 2012 and the 15% rate, the shift of the tax model to one based on location of gambler, rather than company, could reap the UK government up to an extra £309.6m in annual tax revenues. However, a minimum of 5% of the existing market is widely expected to avoid being regulated and taxed in the UK, lowering the likely tax take.
Article written by Peter Holmes
