Severe Rise in Gibraltar’s Taxes on Online Gambling

Different classification of online gambling companies

This weekend brought bad news for all online gambling operators based in Gibraltar, with the UK newspaper Guardian reporting about the government’s plans to tenfold the current 1 percent tax rate from 2011, which is set with a ceiling of EUR500,000 per year. Still, to keep the regime attractive, online gambling companies will not have to pay VAT. It was further specified that this industry employs 2,000 people, or 12 percent of the workforce in Gibraltar, lending a helping hand to the local economy against Spain's harsh economic climate.

Precisely the thing that drew a great number of online gambling companies to Gibraltar, including Party Gaming, Victor Chandler, William Hill and Ladbrokes, was its low tax rate, which has of recent attracted the internet divisions of Ladbrokes and William Hill to move from the UK that has a very high taxation rate, in order to be turn into a better competition to offshore companies.

According to the newspaper, online gambling company taxes filled the Gibraltar government’s budget with EUR12.4 million in 2009, and this number will be ten times higher in 2011 as the government plans to bring the online gambling taxation to the same level as for other types of companies. However, this number may turn out to be much lower if the companies decide to move to some other place with softer tax regime.

The regional newspaper El Paid learned from a bookie Victor Chandler that: "Nobody will leave, although we'll all complain about the tax going up."

The Premier of Gibraltar Peter Caruana, explained the government’s tax raising plans as a strategy to conform with European law, saying: "To comply with EU law we must phase out the tax-exempt company system in 2010. However, in order to sustain our successful economic model we must retain a commitment to a very competitive corporate tax model."

In addition, The Guardian underlined that Gibraltar's neighbor Spain has internet gambling regulations in the pipeline to supply the demand for the online gambling of around 200 000 Spaniards who wagered around Euro 575 million over the internet in 2009.

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