- DCMS again criticizes 15% tax rate.
- Unlikely the Treasury accedes this request given the UK’s fiscal position.
UK proposals for Point of Consumption (PoC) based gambling regulation have been broadly approved by the parliamentary committee responsible for reviewing them.
The Department of Culture Media and Sport (DCMS) Select Committee has given the go-ahead for the UK government to take the proposals to the next stage in the legislative process.
One area where the Committee has taken notice of industry concerns is in the level of taxation that the Treasury is likely to propose if the bill is enacted. The current 15% of Gross Gaming Revenue (GGR) is assessed as being potentially too high.
The Committee has asked the Treasury to review the figure to ensure that the rate doesn’t incentivize players to leave the regulated sector and play on so called grey-market sites.
“In setting a rate of tax, the Treasury should bear in mind the need to avoid setting it at so high a level that companies and their customers are driven into the black market,” the committee recommended.
DCMS has previously criticized the existing 15% tax rate in an extensive report, which concluded that “... it could lead to 40% of the industry leaving the market.”
It is difficult to see the Treasury acceding to this request given the UK’s fiscal position and the fact that the latest government financial estimates include assumptions that the rate will be set at 15%. To reduce the rate now would reduce the expected income and require offsetting budget cuts.
Major objections that the proposals raise tax without bringing real consumer benefits, raised by the Remote Gaming Association (RGA), the Gibraltar Gaming Commissioner and operators including William Hill, have been disregarded.
The objectors argued that the purpose of the bill was simply to increase tax revenues, and thus contravened EU treaty obligations. The Committee responded to the objections by taking supplementary evidence from the DCMS civil servant in charge of getting the legislation passed, and the Head of the UK Gambling Commission.
This supplementary evidence is prominent in the final report and sets out an argument that the Committee believes is sufficiently strong to head off the risk of the law being overturned in the EU Courts:
Although we cannot rule out the possibility that a disgruntled remote gambling operator or association might try to bring a case against the UK in the European Court of Justice, we are satisfied that the Government has considered the compatibility of the proposed legislation with EU law and we note its confidence that any challenge to the legislation would be unlikely to succeed.
The report points out that “less than 5% (by value, not transaction) was in the unlicensed, unregulated 'black’ market” but argues that this part of the market caused grave concerns over criminality, money laundering and protecting young people.
The bill has very little to say about new enforcement measures such as IP blocking or other measures which could reduce this problem.
The Committee was partially reassured by the Gambling Commission’s confidence that “the extra income resulting from more remote gambling being brought within the licensing regime would provide sufficient funds to pay for the extra work of enforcing the new regime.”
The Committee stated that it would monitor the progress of such enforcement.
Land based casinos argued that it was unfair that they were prohibited from offering online gambling from their premises. The Committee conceded the point and recommended that the government amends the bill to change this.
The new PoC measures are expected to be passed into law some time later this year, and will be accompanied by a Treasury bill to change the way gaming duty is calculated. Licensed operators will thereafter only pay the tax on their UK customers and not on their worldwide income.