According to Philip Graf, Chairman of the UK’s Gambling Commission, “[The Gambling Commission] regulate less than 20 percent of online gambling by British consumers”.
Stats are an interesting thing. One that I heard the other day was that 98% of stats are simply made up by the person quoting them. No doubt that was a pretty rubbery figure also!
Unquestionably though, the vast majority of internet bets on sports and casino games placed by British residents would be with offshore based (licensed or not) operators. Heck, even the biggest names on the High Street …William Hill, Ladbrokes, BetVictor, bet365 etc, have either all or a significant part of their online business licensed and based outside the UK.
Under the terms of the The Gambling Act 2005 (“the Act”), any operator licensed in a white list country is allowed to not only offer their product to British players, but also market that product in the UK both online and through traditional media. They’re pretty much given the same access to the market as locally licensed operators but without any reporting obligations (to UK Gambling Commission), or any requirement to pay taxes to HM Treasury. As an operator why wouldn’t you want to locate offshore?
Always thought this was a very generous arrangement. So did quite a few politicians including, John Penrose. In 2011 he announced that an overhaul of the Act was on its way.
In December 2012 an important milestone in this overhaul was reached with the Government publishing draft amendments to the Act. Once passed, these amendments will change the focus of regulation from ‘point of supply’ to ‘place of consumption’. All overseas based operators wanting to participate in the UK online gambling market will need obtain a licence from the Gambling Commission to do so, regardless of what other licenses they already have.
They will also then be subject to operating provisions of the Act. They will be compelled to report details like instances of suspicious betting activity. They will also be required to pay tax on their UK source income. Although the draft legislation wasn’t specific on gambling tax, documents published with it stated, “subject to HM Treasury, operators would also contribute to UK gambling tax”. Improved online gambling oversight seems to be the main reason given for the amendment. Closing tax loopholes is probably the real driving force however.
Operators who relocated at great expense to dodge UK taxes aren’t going to be thrilled that some of that tax (won’t apply to their customers from the rest of the world) is following them over to Gibraltar, Malta or the Isle of Man. William Hill’s CEO has already said that his company may legally challenge a point of consumption tax if and when it is implemented.
I imagine that legal challenge will involve some argument that the proposed POC tax is inconsistent with EU freedom of services principles. That old chestnut.
The other old chestnut is the lack of impact that these changes to the Act will have on unlicensed (anywhere) operators. They take almost 10% by value of online bets placed in the UK (remember the 98% stats rule).
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