KPMG: 'PoC tax could put operators out of business'
Accountancy giant says a levy of more than 10% will either send operators to the wall or grey market
Online gambling operators will be in immediate danger of going out of business should the UK government introduce a 15% point of consumption (PoC) levy, a KPMG study has found.
The report, commissioned by the Remote Gambling Association (RGA), also concluded that a “very large number” of UK customers could switch to unlicensed off-shore providers due to their ability to offer more attractively priced products while some operators may be forced to operate in the grey market.
Last month, the Treasury confirmed it is to apply the existing remote gaming, betting and pool betting duty rates of 15% of gross profits to all online activity involving UK-based consumers in a move which it expects will raise around £300m a year.
However, KPMG states the proposed tax regime may fail to achieve its aims unless the rate of tax is no higher than 10% and it makes allowances for companies to offset costs associated with bonuses and incentives.
The government currently deems bingo, poker and casino bonuses as not tax deductable and, according to the report, this stance will further damage the ability of licensed and taxpaying operators.
RGA chief executive Clive Hawkswood has urged the government to take note of the evidence.
“It is vitally important that the government does not repeat past mistakes. It needs instead to set rates of remote gaming and betting taxation that give operators a realistic chance of being competitive in what is an inherently international market,” he said.
“We argue strongly that any rate above 10% gross profits tax is not sustainable in what is a very mature market where consumers already know what level of value and choice to expect.”
A PoC tax is expected to be implemented by December 2014, however, a challenge is expected to come from the Gibraltar Betting and Gaming Association. In June it was revealed 23 of its members contributed more than £500,000 in order to prepare a legal challenge against the proposals.
Speaking to eGaming Review last month, Gibraltar gambling commissioner Phill Brear predicted the tax would be “counter-productive“.
“[The proposals] will dilute and damage existing UK companies, jobs and investment, and they are a poor deal for consumers as they increase prices while diminishing the quality and safety of the UK market,” he said.