As has been widely predicted, remote gambling is to be taxed at the point of consumption rather than the current point of supply.
Delivering his third budget speech in the Commons, Chancellor George Osborne today announced that the government will move to a tax regime that ensures operators anywhere in the world pay gambling duties on gross profits generated from customers based in the UK. This is in line with the actions of several other EU countries.
The current taxation regime for remote gambling has allowed operators to avoid paying UK gambling duties by basing their operations abroad. However, moving UK gambling duties on to a point of consumption footing will broaden the tax base and provide a fairer basis for competition between UK and overseas remote gambling operators.
Gareth Martyn, indirect tax director in PwC's betting and gaming team, commented: " Recently, many large online bookmakers and remote gaming businesses have moved offshore to benefit from the lower rates of duty and tax in locations such as Gibraltar and Alderney.
"The government faces a number of challenges ahead of the introduction of the duty to ensure that it can be effectively administered.
"A similar form of duty is already in place in some mainland Europe states, but it is interesting to note that the introduction of a similar regime in Ireland has been delayed for over a year."
A statement from Global Betting and Gaming Consultants read: “At this point, we are worried that the government is looking more and more like some continental European countries that are using the gambling industry as an ATM machine, at the expense of jobs and innovation. GBGC hopes that the government will listen to the industry in regard to the implementation of a consumption tax and avoid any further drastic tax changes that could drive the industry to the wall or introduce illegal gambling to Britain.”
Director and economist at FTI Consulting Alison Sprague believes that many will be pleased to see that the Chancellor has addressed the remote, online gambling tax loophole, which has resulted in substantial revenue leakage out of the UK economy. “By redressing the regulatory anomaly created by the Gambling Act 2005, the Chancellor has removed the incentive for companies to locate their gambling equipment offshore while still targeting the UK market." Sprague added: “As it stood, the Gambling Act 2005 enabled companies from all over the world to market to the UK without a UK gambling licence as long as their equipment was located in a so-called ‘white-list’ of jurisdictions (currently Alderney, the Isle of Man, Tasmania, and Antigua) or the European Economic Area (including Gibraltar). In short, operators found that they could pay less, and typically no, tax (realising substantial cost savings) if they located their equipment in tax efficient white-listed jurisdictions, whilst maintaining a presence in the UK (typically their marketing team). Not surprisingly there was a significant migration from the UK.”
