Regulation round-up 25 March 2014
The biggest regulatory news from the egaming industry in the last seven days (19 March to 25 March 2014)
UK remote betting tax confirmed at 15%
RGA hits out at rate while budget announcement also reveals online bingo duty will be more than land-based equivalent
UK Chancellor of the Exchequer George Osborne today has confirmed the looming Point of Consumption (PoC) tax will be set at 15%, disappointing an industry that fought against the rate.
The levy, which is set to be implemented in December, will be applied to gross profits derived from UK-based customers and is expected to include those generated through the offer of sports betting bonuses.
Bookies had been hoping that sportsbook enhancements would be omitted from the tax, a move which would have seen it aligned with other verticals such as bingo and casino where bonuses are tax-free.
The confirmation of the levy rate comes after fierce objection from operators and trade associations such as the Remote Gaming Association (RGA) and the Gibraltar Betting and Gaming Association, the latter having threatened legal action against the tax.
Bookmakers feel brunt of Budget tax hike
Bookmakers were hit hard by changes to the UK tax regime revealed in yesterday’s Budget, with many recording share price slides as the government launched a two-pronged raid on industry revenues.
A 5% increase in machine game duty to 25% only served to compound confirmation the Point of Consumption tax rate will stand at 15%, a level the industry has long criticised for being commercially uncompetitive.
And eGaming Review understands that operators received no warning of the surprise increase in machine duty despite meeting with government officials in recent weeks.
Seven days in regulation:
Point of Consumption: What happens next?
The UK government yesterday confirmed the news the online gaming industry had expected and feared; that gross profits derived from UK-based customers will be subject to a 15% levy.
For the Remote Gaming Association (RGA), one of the industry groups lobbying hardest against such a rate, the confirmation was disappointing and it reiterated the view a 15% rate of tax will see a significant share of the UK market migrate to unlicensed operators.
However, despite losing the battle, RGA chief executive Clive Hawkswood remains determined to win the war and will continue to make the case for a rate he feels will allow operators to flourish.
UK to “level playing field” in horse racing levy extension
Remote sportsbook operators could be subject to the UK’s horse racing levy after the House of Lords agreed to the move during the third reading of the Gambling (Advertising and Licensing) Bill at the House of Lords stage yesterday.
The Lords concurred that the horse racing levy, which currently only applies to UK land-based bookmakers, should be extended to offshore remote operators and be included in the current Bill.
The amendment, which chancellor George Osborne today confirmed would be passed in the House of Commons, could see remote operators face a £20m hit should the European Commission conclude the change to be compliant with state aid rules.
Opinion: There is only so much squeezing the gambling sector can take
Eliciting sympathy for the gambling industry is no easy task. For years the bookies have played the role of pantomime villain in Britain, but the triple-punch tax grab by the UK government on Wednesday was enough to make the most cynical punter offer a nod of commiseration.
If confirmation of the broad 15% gross gaming online revenue tax was a disappointment and the online horse racing levy a setback then the FOBT tax hike was a disaster. At a stroke the UK government wiped over £20m from the land-based profits of Ladbrokes and William Hill with millions more to come once the new online taxes kick in next year.
The industry has so far been fairly restrained in its response, with the most aggressive language coming from trade bodies such as the RGA and the GBGA. But this felt like a turning point. The constant pressure on the industry is becoming something that’s harder to bear and it feels like the sector needs to start pushing back.
Sportsbet launches legal battle over staff poaching
Sportsbet has filed an injunction with an Australian Supreme Court in an attempt to prevent one of its employees leaving to join local rival BetEasy.
The legal action was prompted after its customer services manager Kelli Carpanini gave notice she was defecting to Beteasy, a firm recently established by Sportsbet founder Matthew Tripp.
Paddy Power-owned Sportsbet claims Carpanini breached her three-month non-compete period by commencing work for BetEasy earlier this month.
German licensing process attracts further criticism
A German court has referred several questions regarding Germany’s sports betting licence procedure to the European Court of Justice (ECJ), highlighting perceived inconsistencies and a lack of transparency.
The district court of Sonthofen has asked the ECJ to clarify the criteria for a German sports betting licence related to the controversial Interstate Treaty, which came into effect on 1 July 2012.
Among the inconsistencies questioned is a lack of published selection criteria, with applying operators left in the dark over what detail was required to be considered.
UK bingo industry divided on 10% duty
UK bingo operators were caught off guard yesterday after UK Chancellor of the Exchequer George Osborne announced the government is to halve bingo duty on land-based bingo halls from 20% to 10%.
At the same time, the government also confirmed the UK Point of Consumption tax (PoC) on remote operators would be set at 15%, meaning online operators will now pay 5% more in taxes on profits than their offline brethren.
Joe Saumarez Smith, chairman of Bede Gaming, said he was surprised by the announcement and believes there should be a single tax for online and offline bingo activities, which should also be extended across other verticals.
Analysis: Racing levy reignites betting rights debate
Online operators are facing the issue of paying betting rights on horse racing in the near future, after the UK chancellor yesterday signalled he was considering introducing the measure as a replacement to the horse racing levy.
A sharp reduction in revenue generated by the horse racing levy led the British government to extend the levy to offshore bookmakers while also calling for a consultation into whether bookies should contribute more by paying for betting licences for racing events.
The idea of racing rights has been floated for years but now appears to be gaining traction. In basic terms it would allow a sport’s governing body to charge a licence fee for any bookie wanting to take bets on its events and could theoretically spill over into other sports including football.
UK market will suffer like the rest, says Gibraltar chief
The UK’s imminent switch to a Point of Consumption (PoC) regime will give “free-reign” to unlicensed operators wishing to lure customers with better value, according to the Gambling Commissioner of Gibraltar.
Phill Brear, who was speaking to eGaming Review following the UK’s confirmation of a 15% of gross profits levy last week, said the country would struggle to control the size of the black market in a similar fashion to countries such as Italy and Spain following the inception of their ring-fenced markets.
Brear, who was previously director of operations at the UK Gambling Commission, says the levy rate will only serve to play into the hands of non-compliant operators unrestricted by the pressure on margins felt by their licensed competitors.
Analysis: Budget surprise highlights Ladbrokes’ task at hand
With the Point of Consumption tax looming the likes of William Hill and Ladbrokes will have already been readying themselves last Wednesday afternoon, however little would have prepared them for what chancellor George Osborne had in store.
A surprise increase in machine game duty “ which had not been discussed with gambling firms prior to the Budget announcement “ wiped around £500m off the value of Lads and Hills and as a result laid fresh scrutiny over their digital operations.
Ladbrokes appeared particularly irked by the surprise increase and said it will seek a government review, claiming it to be “based on commercial success of a product, not on any strategy or basic taxation principles”.
UK regulator hires industry veterans ahead of PoC
The UK Gambling Commission has moved to strengthen its senior team with the hire of two industry veterans as the regulator gears-up to implement its new online regulatory framework this summer.
Ladbrokes customer services director Sue Harley and Roger Parkes, former director of group compliance at Betfair, have both joined the regulator to provide expertise and insight to support the Commission’s work in regulating remote gambling operators based offshore.
Harley has joined the Commission on a fixed-term contract to cover the maternity leave of Sarah Gardner, the regulator’s director of planning and performance.
Spain moves closer to online slots launch
Spanish regulator the Dirección General de Ordenación del Juego (DGOJ) has notified the European Commission (EC) of its draft decrees on slots and exchange betting as it remains on course for an anticipated Q4 launch.
The EC is expected to validate the decrees within a three-month period, although this could be extended should it receive any objections from other member states, which at present seems unlikely.
The process should be completed by 19 June which will allow the Spanish regulator to approve the new regulations in a matter of weeks.
Intralot chosen to overhaul Irish National Lottery
Intralot has been selected by Premier Lotteries Ireland Limited, the parent company of the Irish National Lottery, to overhaul its online and mobile products.
Under the 10-year deal Intralot will provide its LOTOS online gaming computer system for the lottery’s online and mobile channels, which also includes CRM and content management platforms.
The software supplier has also established a new subsidiary “ Intralot Ireland “ to implement and configure the platforms, and will provide on-going consultancy services over the course of the contract’s term.
German court order repealment threatens further delays
The Hessian Administrative Court of Appeal has repealed an earlier decision to fast-track German sports betting licensing leading to threats of further delays.
The move came late last week as the Court repealed an interim decision made by the Administrative Court of Wiesbaden, issued on 20 December, which called for the process “ which first began in August 2012 “ to be accelerated.
The order considered the duration of the process to date to be unreasonable and requested that a decision be made on the application submitted by state-owned operator ODS Oddset Deutschland Sportwetten GmbH within three months.