New Rules for Gambling Operators: UK Makes Risky Move with 15% Tax

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Will Gibraltar-licensed gambling operators pay the 15% point of consumption tax or just pull out of the UK market?

Whether you’re a businessman or just a person who likes to gamble on the internet, you probably know by now that the world’s largest online casinos and betting sites are hosted remotely. Isle of Man and Gibraltar are just two of the most popular locations chosen by operators, along with the exotic countries in the Caribbean.

So far, it’s been a financial paradise, but now the UK Government has decided to put a stop to that. Officials have announced a 15% tax on remote gambling services provided to British players, whereas so far companies only had to pay taxes in the country that issued their license.

But officials are perfectly aware of how valuable the UK consumer market is and now they want companies to pay to have access to it. So will they pay the price?

Reduced supply and higher costs

Financial experts say the initiative is part of a larger move to introduce new taxes on savings across the European Union. The UK Government’s official argument was that the money would “be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis.”

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UK lawmakers might think that introducing this tax will force companies to contribute to the country’s budget or move their business to the UK. But experts disagree, claiming that the only thing politicians can do in order to attract investors is reduce taxes or offer benefits.

Furthermore, financial experts believe authorities are pushing it with this new measure, arguing that prices are determined by supply and demand, not by cost. According to them, smaller gambling firms that cater to UK players will be in trouble, because they won’t be able to pay the tax and their customer base will reduce significantly.

One of the consequences of having less gambling operators to choose from is that the prices of those that stick around will go up. So this new tax will reduce the existing supply, which will end up increasing the costs paid by consumers.

Why Britain is not a better option

Gambling may be a profitable industry, but there are only a number of companies that are doing so well that they can afford to pay the 15 % tax and get a UK license. And yes, most of these firms have a solid customer base in Britain, but tax policies in the Isle of Man and Gibraltar are more favorable than the proposed UK gambling laws and taxes.

For instance, companies based and licensed in the Isle of Man don’t have to pay taxes on capital gains and there are no wealth or corporate income taxes, stamp duties, death or inheritance taxes. The top personal income tax rate is 20%. The same thing goes for import tax of 20 percent. In Gibraltar, there’s no capital gains or wealth tax, no VAT, a low 12% import tax and 10% corporate income tax.

Compared to the UK proper, where corporate tax has been 26% since 2011, the choice is clear. In addition, businesses located in Britain have to pay capital gains and inheritance taxes, motoring, excise, VAT, as well as national insurance. And now the government wants to add an extra 15% point of consumption tax.

Fighting for

In addition, the British regulatory body is preparing new licensing rules for remote operators. The laws require companies based outside of the UK to obtain an additional license from the British regulating body.

The Gibraltar Betting and Gaming Association, which represents several major online and mobile casino operators, is fighting these decisions in court. The European Commission requires all member states to allow free movement of services, and lawyers argue that the new UK law is disrespecting this right.

But many financial experts believe the EU is going in a different direction, as several member states have introduced new fees or raised taxes. Spain, for instance, recently passed a .03% percent tax on bank deposits.

Will operators move to the UK?

It remains to be seen how many companies will agree to pay the tax, but for now Gibraltar and the Isle of Man seem like a much better option. The British Gambling Commission said some operators have already sent in their applications for a new license. The regulatory body is expecting to receive 150 more.

It’s becoming clear that gambling operators fear their business won’t survive without their UK customer base. At least they can be sure about one thing: Gibraltar and Isle of Man won’t be raising their taxes anytime soon, so these two locations are always a safe bet.

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