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UK Online Gambling Law Updates

By: Fabian Rictor, Monday November 28th 2011
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The UK Treasury is expected to complete its review of the £1.7 billion British online gambling market early in December. Experts are of the view that the recommendation of a secondary licensing fee on offshore remote gaming companies operating in the British market is on the cards.

Last week the discussions arranged by Member of Parliament Matthew Hancock threw up a radical proposal. That may not be part on any immediate legislation but has definitely set the cat among the pigeons. The proposal sought to change the definition of where online gambling takes place from the operator's server to the point of consumption, which is the player's hardware. The British MPs took their cue from events in South Africa. Earlier this year the North Gauteng High Court in South Africa had ruled that online gambling takes place at the player's end in the case of a casino operator in Swaziland. Hancock wants to include the definition of where online gambling takes place in an annual Finance Bill. Experts feel that this would not be possible because the Finance Bill does not include regulatory provisions.

This issue apart, the MPs were unanimous in wanting the government to close the tax loopholes enjoyed by offshore online gambling operators. Most of the top 20 operators in the UK market operate from offshore locations and do not pay taxes or horseracing levies in Britain. As mentioned earlier the government too is keen to finalize the matter and has involved the Treasury and the Department of Culture, Media and Sport. Hancock told the media that the minister had not committed a date, but with the cross-party agreement on this issue it is just a question of when.

The gambling group that will be most affected by the secondary licensing fee is William Hill. It has more than 10% market share of the UK online gambling sector and operates from offshore. In order to stall any legislation on this matter, William Hill had recently commissioned the respected professional business services provider Deloittes to carry out its own review. The results have been just published. Deloittes concludes that secondary taxation at the point of consumption could lead to an exodus of the more reputable online gambling operators, forcing an estimated 40% of the players to shift to unauthorized and untaxed operators. The report states that the proposed 15% British tax could result in two-fifths of legitimate firms departing the UK market. This would result in the growth of a black market in online gambling. A spokesman for William Hill told The Independent newspaper, "The question for the Government is, should it introduce policy which distorts markets?"

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