It wasn’t unexpected and certainly didn’t come as a big shock but the expected plans to tax all gambling operators on ‘the point of consumption’ played its part in the 2012 UK Budget announcement on Wednesday. This change in legislation is likely to affect all aspects of the gambling industry from high street brands to smaller online bingo operations.
George Osbourne, the current Chancellor of the Exchequer, made his annual budget report on 21st March and included the announcement that the UK is now planning to broaden the extent of its taxation on gambling to include remote, offshore gambling operators. This means that once the measures have been enacted operators across the world will be required to pay set taxes and duties on their gross profit generated from their UK customer base. The inclusion of the term ‘the point of consumption’ highlights the fact that operators will no longer be able to benefit from conducting their operations offshore to avoid the standard gambling taxation for online operations.
As mentioned, this announcement wasn’t unexpected and for nearly a year it has been a consideration that the Department for Culture, Media and Sport have been discussing. Previous to this announcement, the tax rates set for UK based gambling operators in 2007 by the Labour Party government was 15% and has remained at this level. The previous rise in tax rate led to many of the leading brands feeling that to stay competitive that they had no choice but to move offshore. Brands including Betfair and William Hill Bingo and their associated gambling sites, who provide a full range of games from casino to online bingo moved their operations offshore to what is described as a ‘white list jurisdiction’ meaning they could escape the taxation placed upon UK based brands but still benefit from all the positives of being a white listed operator. Other leading brands including Bet365 and Coral have noted many a time that not moving offshore had made it difficult for them to compete with the other brands but these proposed changes should mean that the market is fairer. That being said it also leaves the industry open for further taxation and it remains to be seen if the government are planning on raising the tax rate. Further details regarding this tax rate and the chances in legislation will be published in a later Finance Bill.
Until further details are released it remains to be seen how this measure will affect the gambling industry as a whole; but it is our belief that it will certainly make it harder for the continual supply of brand new online bingo sites and casinos to keep popping up on such a frequent basis. This might be a good thing in the long run for the end user, however how this will affect jackpot prizes and the affiliate market is something that will be revealed in time.