The recent annual budget report by Chancellor of the Exchequer George Osborne included news of a new remote gambling tax, that will change the way that casino, poker and sports betting operators pay their taxes. The announcement has sparked fears that smaller operators could now struggle financially.
Under the last government, gambling operators would pay their taxes on a “point of supply” basis, meaning that the firms would pay their taxes wherever they were based. This led to big UK players like Ladbrokes moving parts of their business offshore, to avoid higher taxes. The new tax forces firms to pay their taxes on a “point of consumption” basis, meaning that wherever the bet is struck, this is where the firm must pay the tax.
Chancellor George Osborne believes that as much as 90 per cent of online gambling is now supplied from outside of Britain, which he has described as “clearly not fair, and not a sensible way to support jobs in Britain”. The new gambling tax is an attempt to create a more level playing field for gambling operators and to try and coax some of the major firms back to Britain, as they will no longer benefit from being based abroad.
It is thought that the new system of taxation will generate extra revenues to the Exchequer of £55m in 2014-15m, £240m in 2015-16 and £270m in 2016-17.
But the news has sparked fears that smaller companies, particular those with an online only presence, may struggle to cope with the new changes, while the bigger brands, with their larger marketing budgets, will likely benefit.
Ralph Topping, the Chief Executive of William Hill, commented on the news that, “Smaller companies will be wondering and worrying about [the new taxation method] more than [we] are. We are confident about our future online”, while Charles Cohen, Chief Executive of mobile gaming operator Probability, told the Financial Times, “It’s going to be great for the big boys and a disaster for everybody else. It will cultivate a big black market.”
The new gambling tax is the biggest change to British gambling since the 2005 Gambling Act, designed to regulate gambling in Britain. It looks set to be implemented by December 2014 and will likely be levied at 15% of gross profits, though the specifics of the new tax remain subject to consultation.