UK Online Gambling Tax Progress

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Since the beginning of the New Year there has been an increase in the activity concerning the proposals for the secondary taxation on offshore online gambling operators in the United Kingdom. Both the government and the industry are involved.

A select parliamentary committee is studying several aspects of the gambling industry, including the possibility of secondary licensing and taxation of online gambling. Former political leaders responsible for gambling in the UK deposed before this committee. Among them were the former Sport and Tourism Minister Richard Caborn and former Culture Secretary Tessa Jowell. They mainly told the committee how the proposal for multiple land super-casinos was deferred following adverse media publicity in the run-up to the 2005 general election. Jowell said that this was a small price to pay for securing the 2005 Gambling Act. Jowell also said that the proposals for the betting machines had been put on probation because the Labour government felt that it would lead to problem gambling. Several other personages associated with gambling in the UK will be appearing before the committee in the coming days.

The online gambling operator William Hill had commissioned an independent survey by the respected international professional services group Deloitte. The results of that survey reveal that if the tax burden on online gambling was increased then UK punters would be driven to unregulated sites and smaller operators would be forced out of the market. If the additional tax was 10% then there would be a loss of 27% of current revenues and if the additional tax was 15% then there would be a loss of 40% of current revenues. There would be a cascading effect on corporation taxes and sports sponsorship as well. Deloitte pointed out that high rates of taxation in France and Italy have led to the emergence of a large unregulated sector. William Hill has submitted the report to the Treasury, which is reviewing a possible new tax regime for online gambling. Ralph Topping, chief executive at William Hill, said, "Money will always find a way out. More people will go overseas or to fly-by-night, unregulated sites where the consumer is not protected. I hope the Government sees sense on this."

Though the gambling group Rank has operations in both land and online gambling, its CEO and chairman Ian Burke, pointed out that online gambling operators pay lower taxes than land based gambling operators. He stated that the European Parliament has found that online and land gambling are competitors, and that legislation that favors one over the other amounts to state aid and is bad government practice. Therefore he proposed an equitable and harmonized tax regime for both. Another factor to be considered according to Burke was that land casinos generate more employment than online ones. Therefore a shift from the former to the latter would result in rising unemployment.

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