28th of February 2011 Author: Natalie Stephanopoulos
UK Minister's consultation crucial
There has been much speculation in the media about the outcome of the UK government's consultation which looks into the current state of matters in which offshore gambling companies operate in the UK market without having to pay local taxes or obtain licenses.
It has been assessed by the publication This is Money that offshore operators may be facing the end of their UK tax-free era.
In terms of the big companies such as Sportingbet, Party-Gaming, 888.com, William Hill and Ladbrokes, the publication states that they are able to provide so many sponsorship and advertising deals thanks to the fact that they don't pay big taxes on territories such as The Isle of Man, Gibraltar and Malta. "None of the companies pays more than one percent tax compared with the 15 percent they would face on the British mainland."
The much anticipated government consultation report, which should come in the next few weeks, is expected to recommend the introduction of a British-specific license for offshore gaming companies. This new regulation will trigger higher costs for operators, and even though it may not be enough to drive offshore gaming companies to turn their back to the UK, the question is whether they can digest the additional taxes such a measure implies.
Replacing the one-percent tax with a 15-percent one may be a big blow for a company's budget – some companies' tax bills will be amounting to millions, depending on how big their offshore operations are.
"People are assuming that the licensing regulation will lead to changes in taxation,” it is opined by industry observers.”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 percent which UK-based operators currently pay. We'd be amazed if the Treasury wasn't already looking at this."
However, in order to be able to cope with these changes, companies may have to cut back dramatically on marketing, which has been lucrative for the UK media and sports industries.
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