British government halts gravy train for UK's biggest books
No one is really sure who will be the winner when the dust settles in the European online gambling scene, but it’s pretty evident who the losers will be – even only a few days after the British government says there are big changes on the way.
This much is sure: The gravy train for the big betting firms – William Hill, Labrokes and a few others – is coming to a halt. Sometime in the near future, they will be forced to purchase licenses in Great Britain, and the low-tax deals they have enjoyed by being licensed in and running their portals out of Gilbraltar will be all but extinguished. And that doesn’t even include what kind of tax levy the government will add on.
The government’s proposal would in essence close what it calls “a giant loophole” that has enabled web gambling firms to operate in Britain but avoid paying taxes in the country. Gilbraltar’s low tax rate (it has been a low as 1 percent on revenue but there has been talk of raising it to 11 percent) on offshores has been too great a lure for Britain’s big betting houses. The latest to ship its online operations south was Ladbrokes, which made the move two years ago, admitting that it couldn’t compete with William Hill as long as its internet operations were based in England.
Clive Hawkswood, president of the Remote Gambling Association, which oversees online wagering in Europe, told Covers.com in an email that the action by the British government is not surprising. “We were briefed in confidence several months ago on the likely decision,” he said.
Hawkswood actually defended the government against charges that forcing online betting houses to be licensed in England is nothing more than a way to gets its hands on more tax money.
“Taxation is a big issue for us,” said Hawkswood, “but the planned UK reform is politically driven rather than revenue driven. Quite simply politicians want UK customers to be protected by the UK regulator. It really doesn't amount to much more than that. Although objectively the justifications for policy change are not strong, there is cross party support for them so unless they fail on some legal grounds I would expect implementation in a couple of years time (they do require primary legislation).”
So, as the move toward forcing online books to be licensed in Britain takes shape over the coming months, it doesn’t take much to figure out who will pay in the end. If books are faced with higher costs and no longer have the option of basing their online operations in Gibraltar, those expenses will be passed on to customers in the form of shorter payoffs.
While Hawkswood and the RGA are hopeful that the British government’s plan (few details are yet available) will “include many regulatory provisions that we would like to see implemented elsewhere,” investors had a somewhat different take on things. Shares at betfair, Ladbrokes and William Hill (all based in Gibraltar) tumbled when the story broke.
One big beneficiary, though, could be Britain’s struggling horse racing industry, where prize money has tumbled and jobs are being lost. The government figures that since the betting houses benefit from horse racing, the least they can do is base their operations in England, pay taxes to the crown and spread a little of the sugar to help prop up the Sport of Kings.