UK tax plans would drive players to unregulated sites, report finds

The UK government’s proposals for a point of consumption tax would drive players to unregulated sites, while smaller operators would be forced out of business even if levels were set at 5%, a William Hill commissioned report, that has been subsequently submitted to the Treasury, has found.

The study by accounting firm Deloitte, commissioned by William Hill, concludes that if the government were to impose a 10% point of consumption tax, as opposed to the current point of supply levy, 27% of current revenues would be directed to unregulated sources. At 15% tax, the figure rises to 40%.

Deloitte found that a 15% tax rate would bring in tax of just £116m after adjusting for a £57m fall to £76m in corporation tax.

The report also warns that smaller operators, accounting for up to 13% of UK online bets, could be “expected to exit following the introduction of a 5% tax”. This rises to “approximately 40% of the industry under a 15% rate”, it suggests.

The report adds there would also be a knock-on effect on gambling companies’ revenues and marketing spend, hitting both corporation taxes and sports sponsorship.

In mid July last year John Penrose, Minister responsible for gambling policy and regulation, announced that the Gambling Act would be amended and that all on and offshore operators selling services into the UK would in future have to obtain a licence from the Gambling Commission if they wish to continue offering online gaming to UK customers.

Penrose said the revamped industry would be based on the point of consumption rather than point of supply, however no detail was, or has since, been given on the tax system this would involve, which jurisdictions would be affected or when this would come into force.

“It means anybody based anywhere in the world who wants to sell gambling services to any consumer based in the UK will, in future, have to have a Gambling Commission licence,” Penrose said at the time.

Any new licensing system however would require a change in primary legislation. The hope from the industry is that a discussion on what form and level of taxation will be imposed will materialise prior to implementation. The Treasury has said it is currently analysing responses to its review and that it will announce its findings in due course in order to determine a new tax regime for the sector.

Currently any operator offering services in Britain must be licensed or regulated in either an EEA state or one of the states approved by DCMS on the White List that includes the Isle of Man, Alderney, Antigua, and Tasmania.

The new proposals would effectively mean the end of the White List as it stands, however Penrose has said that the Gambling Commission would ensure that regulatory good practice is recognised so that overseas based businesses in “trusted jurisdictions”, such as the white listed countries, would have much “lighter touch approach and, for example, will not have to duplicate regulatory work.”

In between a final decision being made on licensing and taxation all white-list located entities will be entitled to a transitional licence and can continue trading as normal.