Gib operator group ready to challenge UK gov over POCT

The influential Gibraltar Betting and Gaming Association (GBGA) has urged the UK government to “abandon” the regulatory changes outlined in its draft version of the Gambling (Licensing and Advertising) bill and stated that it would have “little alternative” but to take legal action to challenge its decision if it went ahead with its proposals.

In written evidence sent to the government’s Culture, Media and Sport Committee the 24 member body, that includes some of the largest licensees on the Rock, called the proposed draft bill “misconceived and unwarranted” on any objective analysis of the online gambling industry and the levels of consumer protection achieved by the existing UK regime.

Its submission was alongside 30 other written documents from operators including Ladbrokes, 888, Gala Coral, William Hill, Betfair, and Rank to name just a few, while organisations including the Football Association, the Advertising Association and the Remote Gambling Association (RGA) also submitted evidence on opinions on what has so far proved an unpopular series of changes to the industry.

The government has outlined its desire to introduce the Point of Consumption Tax regime by December 2014. This would replace the current system introduced in 2007 whereby operators on the government’s approved White List including jurisdictions such as the Isle of Man, Malta and Alderney, licensed in EEA Member States and licensees in Gibraltar are able to offer and advertise gambling games and services to British consumers.

At the end of May last year eGR exclusively revealed that the GBGA had collectively spent more than half a million pounds in preparation to fight the UK government’s plans to impose a 15% point of consumption tax on operators at the end of 2014.

At the time eGR learned from a number of sources close to the matter that 23 out of its 24 members, all Gibraltar licensees, each paid an average of £22,000 to hire two experienced QCs to prepare a legal case that will aim to either stall or preferably abolish the coalition’s bid to tax UK-licensed operators at the point of consumption instead of the current point of supply.

David Vaughan CBE, of the Brick Court Chambers, and Kevin De Haan, QC with the Francis Taylor Building are the lawyers in charge of building a case for the Gibraltar body.

In written evidence the GBGA called the assertion that UK consumers are exposed to a large and rapidly increasing number of online gambling websites that may be poorly regulated “without foundation” adding that the vast majority of UK customers are currently served by online operators in long established, well regulated jurisdictions within the EEA or white listed territories such as Gibraltar, Alderney, the Isle of Man and Malta.

As many in the gaming industry and those close to this matter suggest, the GBGA believe that from a regulatory perspective, the only possible and partial justification for the bill is based on a “perceived but unsubstantiated threat to UK customers arising from operators in emerging jurisdictions targeting the UK market”. This, it added, is acknowledged by the Department for Culture, Media and Sport in its regulatory impact assessment which “clearly fails to establish any wider detriment based on consumer protection”.

“Even if this limited justification was proven, the Draft Bill is clearly disproportionate since it does not bolster the current white list (including EEA) regime with a requirement for increased reciprocity in the exchange of information and management of consumer protection (which would adequately protect against such risks),” it added.

The GBGA also maintains that the proposed measures would be “impossible to enforce” and adds that “indeed no enforcement measures are proposed”.

“The proposed measures will not achieve the stated objective of enhancing consumer protection. In fact they will be inimical to that objective, driving UK consumers towards operators in poorly or even unregulated jurisdictions who will simply ignore any new UK legislation and tempt consumers with low cost offerings.

“Operators that comply with the new measures will incur very significant new costs and taxes which will need to be recouped from consumers and will necessarily make their offerings less attractive and uncompetitive. The experience of other jurisdictions that have introduced restrictive regimes (e.g. the USA and France) demonstrates that there is an inevitable consumer migration towards such poorly regulated operators,” it explains.

DCMS Select Committee hearing

The submission came just 24 hours before the Remote Gambling Association faced a DCMS select committee hearing in Parliament yesterday morning. Facing questions including assertions that the industry “avoids tax” in a similar vein to international coffee chain Starbucks, Google and Facebook that are domiciled outside the UK but that pay only a small amount of tax on UK earnings, the RGA’s chief executive Clive Hawkswood responded by suggesting gaming operators had moved offshore for competitive reasons.

“Competitive pressure forced them to move. Has the government listened to them they wouldn’t have done it,” he said.

“These are not British companies, they are international. They moved because it wasn’t a level playing field,” he said telling MPS the government’s proposals were “gambling with the future of the industry”.

“The trouble from our side is that, is this a government gambling with our future? If this goes well, well, excellent. If it goes wrong, once we have lost out, the government can look at it again in a few years, and the businesses are ruined,” he added.

Other keys points and claims from the GBGA’s submission:

• There is an astonishing dearth of evidence or analysis advanced by the government to support a fundamental change from an open to a restricted market.
• Far from being “unsustainable”, the current UK regime strikes a proportionate balance between the goal of ensuring integrity and a high level of consumer protection and the creation of a competitive and vibrant remote gambling industry.
• The Draft Bill is ill-timed and counter intuitive. It is inappropriate for the UK to be seeking such fundamental reforms to the licensing and taxation of online gambling just as the EU Commission is formulating policy at the European level.
• The proposed measures both separately and together with the related changes to the tax regime for online gambling are unlawful in terms of EU, national and international law and are liable to successful legal challenge. The GBGA has been so advised by specialist Leading Counsel.
• Absent some cogent evidential and rational basis for the change, EU law will not permit the UK to arbitrarily switch from a free market system that it specifically set up and reinforced in the Gambling Act 2005 to a significantly more restrictive regime that takes no account of licensed operators established and regulated within the EEA. It is a well-established principle that where trading and fiscal rules are to be changed, the compatibility of any new rules with EU law must be examined in light of the pre-existing regime.
• There is a total lack of clarity as to what is meant by the term “point of consumption”.
• The proposal to exempt non-UK transactions from taxation is both discriminatory and constitutes unlawful State aid.
• The related fiscal measures will not in fact achieve the significant tax revenues expected by the Treasury.
• The costs involved in these proposals and related tax measures will cause marketing and other expenditure in the UK by operators to drop markedly resulting in reduced levels of economic activity and tax revenue for the UK.
• A level playing field between domestic and overseas operators will not be achieved given the widely different tax treatment and compliance costs that each will be subject to.
• The proposed measures will have a severe impact on the economy of Gibraltar and the immediate surrounding area in southern Spain.