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UK Likely To Cut Online Gambling Tax

By: Fabian Rictor, Tuesday December 11th 2012
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A report over the weekend in the Mail on Sunday stated that the British government’s Treasury department is likely to cut online gambling tax as a part of an incentive to bring the offshore online gambling companies back to the country. Quoting an unnamed source, probably a senior government employee, the Mail on Sunday said that the benefits would amount to many million pounds. The report went on to quantify that the present online gambling tax rate of 15% is expected to be cut to 10%. But an element of uncertainty was maintained when the source revealed that the Treasury was “close to accepting the argument that the rate on Internet gambling should be slashed by a third”. According to the Treasury’s own estimates, a 5% cut would save the companies nearly £100 million in tax each year.

Seven years ago the then Labor government in Britain had introduced a 15% tax for all online gambling. The major British online gambling groups had opposed this stating that it made them uncompetitive in a tough global market. A number of these operators shifted out of Britain to more tax-friendly offshore havens like the Isle of Man and Gibraltar. The estimated loss of revenue on account of this has been estimated at £2.1 billion over the last seven years. It is expected that this tax cut, if it materializes, will help recoup a part of this revenue loss by bringing the operators back into British jurisdiction. Another reason for bringing the online gambling operators back under British regulatory control is to prevent under age gambling, protect players against problem gambling and other Internet scandals and improved scrutiny on match fixing.

The second issue that the UK government is grappling with is should people pay the tax, the unidentified source told the Mail on Sunday. The answer is a firm yes, though the government is working out exactly how this is to be done. The methodology seems to be the currently under discussion “point of consumption” taxation and regulatory regime that will deny access to the British market unless operators have a UK Gambling Commission license. A carrot and a stick approach therefore seems to be on the cards, the carrot being the tax cut and the stick being the secondary license.

Fair tax campaigners have reacted adversely to the Mail on Sunday report and have criticized any new potential tax concession to the online gaming industry on social and fiscal grounds. The newspaper states, “Opponents to the tax concession point out that other EU countries impose higher gambling taxes of 20% and, in the case of Germany and America, have laws that greatly restrict all online gambling.”

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