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Research Firm Releases Numbers On UK Online Gambling Taxation

By: Adam Baker, Wednesday February 27th 2013
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The proposed new law on online gambling in the United Kingdom is under discussion and will be implemented only in December 2014. A research firm GamblingData has published its figures on how much tax the British Treasury could collect in 2015 for a full year of operation.

GamblingData has explained the basis of its calculations. At the core lies the prediction that the United Kingdom online gaming market will be worth £2.74 billion by 2015, which is more than double the 2008 volume. The present proposed rate of tax is 15%. Though this is under discussion, GamblingData has assumed this rate for its principal calculation. The research firm has further assumed that the rate of compliance will be 92.5%. Based on this the UK Treasury should collect up to £385.7 million as tax on online gambling in a 2015, which would be a revenue bonanza. Should a tax rate of 20% be eventually decided, then the tax collections would go up to a windfall amount of £514 million.

The United Kingdom online gambling industry is opposing the tax rate of 15%. The online gambling operators have warned that this high a rate of tax would lead to a higher rate of non-compliance. The industry’s preferred rate of tax is 10%. It should be clarified that these rates are on Point of Consumption basis. Analysts at GamblingData have worked out that with a 10% tax rate and 100% market compliance the tax revenue will be £274 million. They have pointed out that for the Treasury to get less than £274 million under a 15% POC tax rate, the rate of compliance would have to fall to 67%. This extent of a fall in compliance is unlikely and therefore it will be extremely difficult to convince the government to lower the proposed tax rate to 10%.

The observers of the United Kingdom online gambling industry have cast doubts on the predicted worth of the online gambling market. They argue that the imposition of the POC tax will accelerate the current trend of fewer online gambling operators. The increases in the net gaming revenue are likely to be moderate and in the worst case could even reverse. Online gambling operators are likely to exit from the market fearing that high taxes would affect the viability. GamblingData does not buy this argument. It points out that the football World Cup will be in 2014 and this has always seen a dramatic surge in the United Kingdom sports betting market.

Daniel Stone, head of content at GamblingData, summed up by stating “How the industry’s leaders and the UK Treasury negotiate the transition to the new tax regime could prove to be one of the defining moments for the online sector.”

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