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Black Market Concerns over High Government Taxes on Bingo

  • 14 May 13
  • Written by Deena Chance

altThe Culture, Media and Sport Committee (which is made up of a group of UK MPs) has recently warned the Government not to raise too high a tax rate on online gambling operations in order to prevent the encouragement of black market operators. The committee has scrutinised the new, draft gambling licensing laws that were produced by the government and, whilst it says it supports the regulation of UK gambling activities, it is concerned that taxing legal operators too much could cause illegal online markets to appear. In its report, the CMSC noted out that the existing system has “significant weaknesses” which the Government hopes to address by moving to a point of consumption-based system, and that the legislation to bring all operators (who serve UK consumers) within the tax net is not the Government’s “prime motivation”, but “a consequence.” Whilst the committee backs plans for UK-based operators to be subject to consistent tax rates, regardless of whether they are based offshore or not, it has issued a warning to the Treasury to not set the taxation levels so high that companies and customers are “driven into the black market.”

Many UK bookies, casinos and bingo operators have moved their online businesses abroad to avoid being taxed on profits earned in GB. Operators who are based in the UK currently have to pay a 15% tax on gross profits made from betting, as well as a separate levy on profits made from horse-racing bets. In 2012, William Hill commissioned a study which estimated that a 10% POC tax on remote gambling could lead to 27% of their customers’ online bets being placed in uncontrolled markets unless action was taken to restrict the rise of illegal online markets.

Some operators have claimed that the draft Gambling (Licensing and Advertising) Bill is merely a revenue-raising opportunity for the Treasury, whilst many remote gambling operators that are based overseas say that the POC plans are “unnecessary for consumer protection,” could drive gamblers to black market sites, and that the Bill’s principle purpose is to bring offshore gambling companies within the UK’s tax regime.

Under the new proposals, it is thought that remote operators will display a kitemark on their website to signify that they are a legal holder of a Gambling Commission licence.

As keen online bingo players, would you be more or less likely to play at a site displaying one of these logos? Would you be concerned if a site didn’t display one and assume it was run by an illegal operator?

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