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Switch to POC tax proposal will go ahead, with planned implementation in December 2014. The proposal complements the existing DCMS bill that will require all operators to tax on revenue generated from UK customers.

In a response to comments by the Parliamentary Select Committee on the Department of Culture Media and Sport’s (DCMS) legislative proposals, the UK Government has reiterated its commitment to introducing a place of consumption (POC) tax on online gaming.

The POC tax proposal is complementary to the recent DCMS Bill which managed, in four simple clauses, to extend the regulatory licensing requirement to all operators who offer gambling or online poker to UK residents.

The UK Treasury is expected to introduce the place of consumption tax in its own bill in time for implementation in December 2014.

The effect of the DCMS Bill is to apply the UK’s Gaming Duty to all operators generating revenues from UK customers. The Treasury Bill will then reduce the scope of Gaming Duty to apply only to those revenues which come from UK customers.

UK based gaming companies such as Bet365 will benefit substantially as they will not be required to pay gaming taxes on revenues from their overseas customers, and puts them on a level playing field with offshore competitors. They will, however, remain liable for UK corporation tax.

It will likely lead to the formation of special “.co.uk” poker rooms for UK customers. As is the current trend with more liberal regulations like Denmark, there is no suggestion that players will be seperated away from the main dot.com player pool, so players will not be significantly affected.

However, for operators, the question of online gambling taxation remains unanswered.

The original DCMS report strong advised that maintaining the 15% gross profits tax on gambling duty is unworkable. Citing a report by Deloittes on behalf of William Hill, it warned that such a tax rate would lead to “40% of the industry leaving the market.” It urges the Treasury to set a tax rate that “[takes] into account the need to encourage companies to accept UK regulation” and to discourage the formation of a “gray market.”

In the response this week, The Treasury failed to respond directly, stating only that it will “... continue to work with the industry to consider their concerns ahead of the implementation of the reforms.”

Hopes for a reduction in the proposed 15% Gaming Duty under the point of consumption scheme will certainly not be strengthened by this reply.