I think the British government is on the verge of making a huge mistake.
Matthew Hancock MP successfully managed to persuade a handful of MPs to vote for his bill that would enable the government to tax punters at the place of consumption.
The bill will enable the UK customers to pay horserace betting levy which will delight Hancock he is the MP for Newmarket the centre of British horseracing.
If only things were so easy. They are not. The internet as the government is about to learn is very difficult to regulate. If it were so easy the nasty governments in the Middle East would be better able to control their people. There would be no child pornography on the net, but sadly there is.
Previous draconian measures to control internet gambling have failed. Norway last week bravely admitted that its recent measures of trying to control internet payments for gambling had failed. Italy and France now both admit that 70 per cent of internet gambling goes offshore after trying all types of blocking measures, restricting payments and taking ISPs to court.
What Hancock's bill will do is to cause the listed companies to obey the law and see their customer base eroded while giving encouragement to those based off shore in unregulated areas.
The mistake being made by government is that they are allowing the horse race industry to set the agenda for an industry where horse racing is only 12 per cent of the total UK only internet gambling market. This makes no sense at all. Only a government could consider such a thing.
What should government do? What is the pragmatic solution?
We learned from both France and Italy that punters will not sit there and be taxed to death. They have been seduced by value there is no turning back. The second point is that there are numerous anonymous websites, some of which are not even licensed that will take their money and that segment of the market will grow. The answer is to get ahead of the game. Introduce a rate of tax that the operator will pay to be completely legitimate and one that does not increase the margin against the customer over what is offered illegally. That same rate should apply to offline as well and the UK should actively encourage investment in the casino industry which attracts tourists to the UK.
