The Chips Are Down for an Online Gambling Rout; Tax Penalties Primed to Halt the Offshore Gaming Firms' Winning Streak

Article excerpt

Byline: SARAH BRIDGE

Bright logos and promises of untold riches are everywhere to lure the gamblers. The adverts appear during the breaks on television, next to the rugby pitch, sponsoring horse races and even plastered over the shirts of football players.

Millions of pounds every year are spent by companies such as Sportingbet, Party-Gaming, 888.com, William Hill and Ladbrokes on promoting their websites.

Yet those millions of pounds are available only because of the highly generous tax breaks that these companies enjoy by virtue of being located in a variety of offshore tax havens - from the Channel Islands to the Isle of Man and from Gibraltar to Malta.

None of the companies pays more than one per cent tax compared with the 15 per cent they would face on the British mainland.

But their luck may be about to run out and there are fears within the industry that the almost tax-free - and totally legal - status enjoyed by the off-shore gaming industry could be drawing to a close.

Within weeks the Department for Culture, Media and Sport is to announce the longawaited results of its consultation into regulating remote gaming - offered through the internet and via phones

It is expected to announce that in line with other European countries, every offshore gaming company must get a British-specific licence on top of the one it will already have from the country where it operates. If they the theory goes, they should be licensed here.

The industry is generally relaxed about this as most companies are licensed in countries that already have strict regulations. They will just have to bear the cost of getting an extra licence.

But alarm bells are ringing as many see this as the first step towards changing the tax regime covering offshore companies.

'People are assuming that the licensing regulation will lead to changes in taxation,' said one industry source.

'It's the thin end of a taxation wedge. At the moment, offshore gambling operators pay next to nothing in tax, which is why they went offshore in the first place. But there is an expectation that the rate could be put up to match the 15 per cent which UK-based operators currently pay. We'd be amazed if the Treasury wasn't already looking at this.'

Ian Burke, chief executive of Rank Group, which bases its offshore operations in Alderney in the Channel Islands, said: 'Many European markets are moving to regulating and taxing online gaming and it's inevitable that the UK government will look at changing the offshore tax regime.'

The effect of paying 15 per cent rather than one per cent could be highly significant. First, there is the direct economic impact to consider. …