RGA takes aim at new 15 per cent UK gambling tax

RGA takes aim at new 15 per cent UK gambling tax

Monday, December 1, 2014

The UK’s new point of consumption gambling tax laws, which came into effect today, will mean a worse deal for consumers and businesses according to Clive Hawkswood, chief executive of online gambling trade association the Remote Gambling Association (RGA). 

The new regime, which forms part of the Gambling (Licensing and Advertising) Act 2014, means that a 15 per cent gross profits tax will be charged based on where the customer is playing rather than where the operator itself is based.

The new tax regime is estimated to raise £300m (€378.4m/$472.5m) for the UK Treasury, with the Government promoting the fact that the flat rate will create a “level playing field” between UK and overseas-based gambling operators. The Gambling Act also requires all UK-operating gaming companies to obtain a Gambling Commission license.

However, the RGA told TotallyGaming.com that it is concerned that the 15 per cent level of tax means British licensees will lose significant market share to black market operators and that this will undermine the regulatory objectives of Department for Culture, Media and Sport (DCMS) and the regulatory Gambling Commission.

Hawkswood argues that a rate above 10 per cent is “not sustainable” for companies, who would be forced to cut back on bonuses and other promotions leading to customers seeking out non-licensed companies outside of the UK regulatory and tax regime.

“The economic impact of this change on the industry is significant," Hawkswood said. "In practice it marks a huge increase in the cost of doing business in the British market and it would not be a surprise to see operators reviewing their investment plans and marketing strategies.

“As we have said before, this is a challenging time for the industry and we will continue to engage with Treasury to ensure the impact of the tax changes is fully understood by the Government. The online gambling industry is a UK success story and already contributes significantly to UK Plc in terms of jobs, marketing spend and corporate taxes. We do not want to see the Government’s plans put these companies and their investments in jeopardy.”

The Government introduced the change to legislation back in 2012, saying it wanted to “provide a fairer basis for competition” between remote gambling operators supplying the UK market from the UK and from overseas.

It also said the reforms will help improve the sustainability of the UK’s tax base by ensuring that remote gambling, alongside other gambling products, makes a fair contribution to UK tax receipts with overseas-based companies now contributing to the Treasury.

The implementation of the Act was postponed after the Gibraltar Betting and Gaming Association (GBGA) challenged it at the High Court. The GBGA labelled it as “unlawful”, and claimed it would have no powers to get taxes from operators based outside the European Union. However, their challenge was dismissed in October by Judge Nicholas Green, who said “parliament was clearly within its rights to act as it did”.

The RGA said it “would be unrealistic to expect HM Treasury to review the rates until the new regime has had a chance to bed in properly”, so is unlikely to challenge the law further in the near future.

The launch of the new regulations comes shortly after the Gambling Commission revealed that the British gambling market saw significant growth during the period between April 2013 and March 2014.
 
The British gambling industry generated a gross gambling yield (GGY) of £6.8bn in the period, which represents growth of 6 per cent or £400m on the amount collected between April 2012 and March 2013.
 
Despite the influx of offshore operators, the non-remote betting sector represents the largest market sector with a 47 per cent share of GGY. However, the biggest growth market is the remote betting, bingo and casino sector, having expanded by 22 per cent in comparison with last year.

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