PoC tax objections likely to fail
Attempts to halt implementation of a proposed point of consumption tax would prove a challenge says legal expert
Offshore operators face a “very difficult challenge” if they attempt to overturn a UK government bill to introduce a point of consumption (PoC) tax, according to a leading gaming lawyer.
On Friday, the UK Treasury released a draft Bill which laid out plans to tax all remote gaming revenues derived from UK customers at 15% from 1 December 2014.
A challenge to the Bill is expected to come in the form of the Gibraltar Betting and Gaming Association after in June it was revealed 23 of its members contributed more than £500,000 in order to mount a legal challenge.
However, DLA Piper senior associate Ashley Averill believes it will prove difficult to tax prevent the Bill achieving Royal Assent and affected companies may be better placed to instead make a case for a reduced levy or simply launch a challenge in order to delay its implementation.
“If the reforms are not challenged then they will almost certainly be enacted in current form. If a challenge is mounted, there is a possibility that the legislative process could be delayed, or operators may be able to achieve certain concessions. On that basis, it is definitely worth a try,” Averill said.
The Gambling Commission estimates the UK remote gambling market is worth over £2bn per year and says the new rules will extract around £300m per year in additional tax revenues from overseas operators.
The impact a PoC tax is difficult to predict, however, a 2011 report by professional services firm Deloitte noted that a 15% tax could have a significant impact on the size and structure of the market with smaller operators likely to be pushed out of the market resulting in reduced competition.
The potential impact on smaller operators is something which appears to have been noted by the Treasury, with it said to have been considering a lower rate of tax for businesses with smaller revenues.
However a spokesperson for the Treasure appeared to rule out the possibility of differing tax rates. “A remote betting company based in the UK, or one based abroad, would pay the same rate if they each had UK customers,” he said.
The announcement from the Treasury follows a three-month public consultation period, and complements a previous amendment to the Gambling Act from the Department of Culture Media and Sport requiring all operators to have a UK licence to enable them to transact with British consumers and to advertise in Great Britain.