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UK Legislation Aims At Offshore Online Gambling Operators

Posted on April 15th, 2010

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The Labour government of the UK has plans in place that would target offshore online gambling companies that continue to get into the British online gambling market. The government intends to introduce a measure that would fix a flaw in a law that allows companies based overseas to carry on with their business without having to pay taxes to the UK horseracing Levy.

The new measure would compel offshore egaming firms to pay 10 percent of their gross profits to the UK horseracing Levy, adding new revenue in millions of pounds to the racing industry.

Currently, only betting companies registered in Britain pay the 10 percent tax. The Horserace Betting Levy Board uses part of the collections to fund improvements for the horseracing sport, and to support education programs and other projects. The Levy contributes to more than half of the annual prize given to Britain’s centuries-old sport.

The UK’s high taxation rate of 15 percent on gambling earnings made it tough for William Hill and Ladbrokes to be competitive with other online gambling companies and made them decide to leave the UK and relocate to Gibraltar from where they continue to tap the British online gambling market. Gibraltar can reduce the companies’ tax payments to 2 percent or less.

William Hill spokesman David Hood, said: “When you take the 15 percent tax and 10 percent levy together, that’s 25 pence out of every GBP1 we win going straight out of the door.” In the same breath Hood said that the company still pays the 10 percent tax on all horseracing bets at its 2,500 land-based betting parlors in the UK. After the departure of the two companies, the Levy saw a loss of GBP 4.5 million in 2009.

The UK will conduct elections on May 6 and if the Labour party keeps hold of its power, the new measure will be applied since it has been entered into Labour’s general election manifesto. The Conservative Party and the Lib Dem have both criticized Labour’s plans saying the Levy is “outdated” and that Labour had no understanding of the actual situation.

An official of the British Horseracing Authority, Nic Coward said they will demand assurance for the sport from the party that wins. “Everyone in British horseracing welcomes this firm commitment to ensure that the sport receives the fair return from the betting activity it generates,” he said. The UK Secretary for Sports, Gerry Sutcliffe said, “These plans will also help protect British jobs by assisting British betting operators who to date have remained in the country and pay their fair share to racing. They will no longer face an uneven playing field.”