Britain moves to tax offshore gambling operations

Friday 16 August 2013 16.34
Firms like Betfair, William Hill and Ladbrokes all have online operations based in Gibraltar
Firms like Betfair, William Hill and Ladbrokes all have online operations based in Gibraltar

Online betting companies based in offshore havens to sidestep Britain's gambling taxes will be hit with a new levy that could cost the industry £300 million ($467 million).

Under rules published today, Britain will tax gambling according to where customers are based rather than where the online operator is registered.

This means that offshore operators will pay the same 15% tax rate as domestic remote-betting companies.

The tax will be levied on companies' gross profit - total bets placed minus prizes paid out - in the £2 billion remote-gambling market from December 2014.

"It is unacceptable that gambling companies can avoid UK taxes by moving offshore, and the government is taking decisive action to ensure this can no longer happen," the country’s Economic Secretary to the Treasury Sajid Javid said.

"These reforms will ensure that remote-gambling operators who have UK customers make a fair contribution to the public finances."

The shift will affect some of the industry's largest players.

Ladbrokes, Bwin.party, William Hill and Betfair all have online operations based in Gibraltar, which offers a benign tax regime for gambling companies.

Taxes on online casino gaming operations based in the British territory are levied at 1% on gross profit, with fixed-odds betting taxed at 1% of turnover. Both are capped at £425,000.

Shares in Ladbrokes, Bwin.party, William Hill and Betfair did not move significantly on the news.

"We knew it was coming ... The focus for us now is on trying to get the actual rate of the tax reduced," Clive Hawkswood, chief executive of the Remote Gambling Association said.

The government, which said it will confirm the 15% rate in its budget statement next March, estimates that the new rules will bring in £300 million a year in additional tax revenue.

Traditional land-based betting will be unaffected, the government said.

Land-based betting is also mostly taxed at a rate of 15%, except for land-based gaming, which takes in the likes of gaming machines and bricks-and-mortar casinos.

This attracts a variable tax rate of between 15% and 50%, a Treasury spokeswoman said.

Plans to bring offshore gaming companies under the British tax system were outlined in the British government's 2012 budget, but the industry had been waiting for the detail - most crucially the rate at which they will be taxed.

William Hill, which has the largest share of the UK's remote-gambling market, has previously suggested that it could challenge the changes on the grounds that they breach European Union competition law.