Online gambling companies that cater to British customers but base their operations offshore to avoid higher tax rates will be facing stiffer regulation come December 2014 when a new law goes into effect.
A remote gaming duty of 15% will be levied against the likes of Betfair, William Hill, Ladbrokes and Bwin.party, who are all based in Gibraltar but have a strong presence in the UK. Those companies currently enjoy a tax rate of only 1% with a cap of £425,000 in Gibraltar.
The UK Treasury estimates that £300 million in additional yearly revenue will be gained by cracking down on remote gaming operators. Those who fail to comply with the new law and tax rate are subject to harsh penalties that include heavy fines, loss of gaming licenses in Britain, and prison time for company executives.
“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 in the future,” said Sajid Javid, the Treasury’s economic secretary. “These reforms will ensure that remote gambling operators who have UK customers make a fair contribution to the public finances.”
The Gambling Commission estimates that remote gaming takes in more than £2 billion every year, The Guardian reported. In addition to revenue gains for the Treasury, the rule change that takes effect December 1, 2014 will allow companies that operate in the UK to compete on equal grounds.
“We knew it was coming,” said Remote Gambling Association chief executive Clive Hawkswood. “The focus for us now is on trying to get the actual rate of the tax reduced.”
In aiming for a reduction, William Hill will likely argue that the new rate of taxation is a breach of European Union laws regarding competition. As Britain’s largest operator of remote gambling, the rule change intending to levy taxes according to place of consumption rather than place of supply will put a heavy dent in company profit margins.