Breaking: Chancellor confirms UK point of consumption tax
George Osborne says remote gambling introduced by last government allowed overseas operators to "largely avoid it " and much of the industry has, as result, moved offshore".
Chancellor George Osborne has confirmed plans to tax online gambling operators offering bets to UK customers at a point of consumption rather than a place of supply.
In his budget speech early this afternoon Osbourne said that the current duty regime for remote gambling introduced by the last government was levied on a place of supply basis and that this had allowed overseas operators to “largely avoid it “ and much of the industry has, as result, moved offshore”.
“Ninety per cent of online gaming in the UK consumed by our citizens is now supplied from outside the UK. And the remaining UK operations are under pressure to leave”, he added.
Gareth Martyn indirect tax director at PwC’s betting and gaming team, said: “The introduction of a consumption tax on remote gaming had been widely predicted and will mean that duty is payable on all bets made by UK customers irrespective of where the gambling business is located.
“Recently many large online bookmakers and remote gaming businesses have moved offshore to benefit from the lower rates of duty and tax in locations such as Gibraltar and Alderney.
“The government faces a number of challenges ahead of the introduction of the duty to ensure that it can be effectively administered. A similar form of duty is already in place in some mainland Europe states but it is interesting to note that the introduction of a similar regime in Ireland has been delayed for over a year,” he added.
Dual taxation
As expected the Chancellor also announced that he would also introduce double taxation relief for UK-based online gambling operators from next month. “These changes will create a more level playing field, and protect jobs here,” he added.
The confirmation of the provision effectively ensures that the 200 or so Gambling Commission licensed companies avoid being taxed on the same bet twice. This will come as a particular relief to John and Denise Coates, co-founders and co-CEOs of Stoke-based bet365 that is one of the city’s biggest employers with 1,700 staff. John Coates has been heavily involved in ensuring the business remains in the UK but only if the current regime, as it now will do, switches to a point of consumption tax whereby the operator will be taxed on UK bets alone. More than three-quarters of bet365’s revenue is generated from sports betting.
If the regime had not changed eGaming Review understands that bet365, despite its extraordinary ties to Stoke, would have been forced to reconsider its position.
The Chancellor also said he would introduce a new Machine Games Duty with a standard rate of 20% and a lower rate for low stakes and prize machines of 5% of net takings. This comes into effect from 1 February 2013.
John Penrose, Minister responsible for gambling policy and regulation, announced in July last year that all on and offshore operators selling services into the UK would in future have to obtain a licence from the Gambling Commission if they wish to continue offering online gaming to UK customers. Any new licensing system, however would require a change in primary legislation.
A bill calling for a point of consumption tax to be imposed on UK-facing egaming operators was granted a second hearing on 8 February. Introduced by Conservative Member of Parliament for West Suffolk Matt Hancock under the Ten Minute Rule, the bill was brought on the premise that offshore operators are depriving horse racing authorities of funding, and consequently also looks to ensure operators contribute to the horse racing levy.
The unanimous passage to a second hearing is no guarantee of the bill passing into law, but continues to raise the divisive point of consumption debate, which a number of operators consider unworkable.
At a DCMS select committee hearing last November, bet365 co-CEO John Coates warned that the fear of double-taxation as a consequence of a point of consumption tax could see even more operators forced offshore. Hancock has stated in Parliament that “18 of the 20 largest [UK-facing] bookmakers” are based overseas.
Last month a study from Deloitte, commissioned by William Hill, found that a point of consumption tax could drive players to unregulated sites and smaller operators out of business.