Offshore companies operating on the British online gambling market are to face a new tax, which the Treasury estimates will generate about £300 million per year.
The 15% tax will come into effect in December 2014, when another rule stating that operators should be taxed depending not on where they are based but where they operate comes into force. Thus, offshore companies will be taxed in the same way as British online gambling companies.
According to Sajid Javid, economic secretary to the Treasury, by moving offshore UK gambling companies can avoid paying taxes and the government is taking steps to prevent this from happening in the future. He added that the new rule will mean a fairer contribution from gambling companies to the country’s finances.
The new tax rate is set to be confirmed in next year’s Budget in March 2014 and will affect some of the biggest players on the market, including William Hill, Betfair, Ladbrokes and Bwin.party, which are all based in Gibraltar, where taxes are capped at £425,000.
The reform was first suggested in last year’s Budget and William Hill stated back then that, if the rule came into effect, it would challenge it for violating European Union competition laws.
Estimates from the Gambling Commission reveal that last year the global remote gross gambling yield (GGY) was £21.08 billion, a 5% increase on the previous year, with GGY operators in the UK accounting for approximately 4% of the total. GGY generated for offshore businesses by UK consumers grew by about 1% between 2011 and 2012.