The UK Government is set to take a major and potentially controversial step with regards to offshore gaming companies. It has announced that it will introduce a 15 per cent tax on the gross profits of those companies that have UK customers.
Set to take effect in December next year, the tax could net the Government around £300 million – yes, £300 million, in extra tax revenue per year. The measures would more than likely effect major gaming companies like Ladbrokes, Bwin.party, William Hill and Betfair, whose online divisions are all officially based in Gibraltar.
Those companies, and others based in the British Overseas Territory, currently pay a levy of one per cent of gross profit and one per cent tax on turnover from fixed-odds betting, though both of those are capped at £425,000.
Gaming companies would pay a whole lot more than this when the new tax comes into force. In 2012, William Hill made £330 million in gross profits. Should the company pull in a similar amount of profit in 2015, it would likely mean that they would have to pay £49.5 million in tax, a remarkably huge difference to the £850,000 maximum it is currently subjected to.
The tax could also be an added headache for Ladbrokes, which was currently been grappling with a company restructure in lieu of declining profits. Its profits took a major dive in the first half of this year, declining to £55.1 million, which resulted in the cutting of its full year earnings to £172 million.
Bwin.party is also in a similar situation, having turned in a €164.9 million (around £140.6 million) profit in 2012, which equated to a 17 per cent drop on the year before.
Economic Secretary to the Treasury Sajid Javid said that the measures would put offshore based gaming companies in line with their counterparts who base their operations in the country.
“It is unacceptable that gambling companies can avoid UK taxes by moving offshore, and the Government is taking decisive action to ensure this can no longer happen,” he said. “These reforms will ensure that remote gambling operators who have UK customers make a fair contribution to the public finances.”
It comes as little surprise that the UK Government has taken these measures on offshore gaming companies. The Government had previously highlighted its desire to put its taxes in line with those of UK-based companies in last year’s budget.
While some may criticise the move as a blatant money grab, it is unlikely to have any large scale public opposition, especially as the country is still in its very early stages of economic recovery.