While many online casinos clamor for a free market in Eastern Europe, it is evident that not all online casinos wish for a completely free market in Western Europe. Betfair, one of the online gambling sites in the UK, is now threatening to leave the United Kingdom, citing the government’s failure to regulate offshore betting websites.
To be fair, the issue is not merely about freedom to operate, but also operating under equal conditions. Betfair feels unfairly targeted by a proposed tax increase. A key distinction between online sportsbooks in the UK and those which are hosted offshore is the 10% horseracing levy. While tiny and offshore bookmakers can avoid this tax, the British Horseracing Authority (BHA) requires Betfair to pay millions, over £6 just last year.
Complicating the issue is the BHA’s allegation that professional bookies who would and should ordinarily be subjected to the tax are abusing Betfair as a bypass. Betfair denies the charge, but the levy’s fund has certainly diminished from £115 million to just £75 million over the past three years. Oddly, even while protesting the tax, Betfair made a generous £1.25 million voluntary payment owing to its overseas customers who participated in UK horse race betting.
While Betfair has no immediate plan to leave, Betfair is in possession of a contingency plan to move to Gibraltar, which it will enact if they feel unable to adequately compete in an environment of increasing taxes and unburdened offshore competition. In this they would be following their rival William Hill, who last June already moved their internet betting and telephone betting business.
In Gibraltar, betting companies are not subject to any horse racing levy, and the gross profit tax (GPT) is merely 3%. By further contrast, GPT in the UK is 15%. In the short term, Betfair, a public company, currently plans to float £1.5 billion on the stock market.
Furthermore, Betfair has opened a new Dublin office, employing about 100 staff. Outside the UK’s jurisdiction, it provides additional flexibility within the evolving regulatory environment. Some may also consider it a warning of the government’s need to take action if their revenue from taxing betting isn’t to be entirely lost.
A plethora of offshore sportsbooks and gambling casinos were born after the creation of the UK’s Gambling Commission in 2005. The Department of Culture Media and Sports (DCMS) held opened consultations with Betfair between last March and June. Since then, dialog has ended and the idea was credited to the previous government.