Other recent
entries in this blog:
10 January 2010
The Geese Are Dead
The British government is now face to face with the consequences of the mistakes
it has made over the last ten years in regulating and taxing its gaming sector.
It is scarcely the only country to have trodden the same error-strewn path,
but in the case of the UK the damage is greater because of the highly profitable
industry which the government's policies have now almost destroyed.
'For many reasons, increasingly few companies active in the British market
are now regulated by the Commission,' bleats Minister for Sport Gerry Sutcliffe.
So what has happened?
In 2001 the Government replaced its age-old system of taxing punters with a
15% tax on gaming gross profits (and operators also have to pay VAT plus corporation
tax plus a super contribution on any horse-racing turnover to a superannuated,
cosy old industry nag called the Betting Levy Board). This step wouldn't necessarily
have been fatal on its own, but when Internet betting started to supersede the
betting-shop kind, and UK-based operators began to desert in droves to Malta,
Gibraltar, Costa Rica and the Channel Islands, the government imposed a 15%
tax on Internet gaming profits for all those firms which it licensed, and created
a tough licensing regime under the Gaming Commission. But it could only license
firms on its own territory and was forced to allow in all EU-based firms, without
being able to tax them.
Now, with gaming tax revenues disappearing down a black hole, it is having
a King Canute tantrum and wants to impose licensing (and hence taxation) on
all the firms that operate in the UK (ie advertise there for punters). But why
should the EU permit this? There are perfectly adequate regulatory, licensing
and taxation regimes in Ireland, Malta and Gibraltar, all EU Member States,
and where the ex-UK betting firms now prosper. Under what circumstances are
they going to allow the UK to steal their revenues, or to replace their rules
with a new set? And under what law can the UK forbid another properly-licensed
EU operator from advertising freely throughout the EU?
The ECJ's Gambelli ruling in 2003 was unequivocal: gambling is a service and
is subject to EU freedom of establishment rules. There is no way in which one
EU Member State is going to be able to impose its own legislative practices
on another one. The EU Commission has already attacked France on this issue.
It is a mystery how Minister Sutcliffe could be so badly advised as even to
try.
What the government should have done was to accept the inevitable and offer
a light-touch, low-tax regime to compete with Malta et al, instead of hiding
benhind a hypocritical ('protect our children') smokescreen. All it really cares
about is the tax, and now it has lost that along with the gaming industry. The
existing law is a dead letter, as the government is implicity acknowledging:
you can ban a foreign firm from advertising on the Internet, but Berkshire is
not Beijing, and if a 16-year old wants to place bets with a Costa Rica poker
site using his father's Swiss credit card and bank account, who is going to
stop him?
Even now it is not too late for the government to come to its senses, but under
Pastor Gordon Brown's presbyterian theocracy, and faced with the Treasury's
emptying treasure-chest, what chance is there of that? The few remaining British
gaming firms will now pack their bags and leave. 'Mene, mene, tekel upharsin'.
01 January 2010
Reciprocity: That's The Name Of The Game
Reciprocity. It sounds so fair and reasonable, doesn't it? Argentina is applying
the principle in its new border tax: if my country charges Argentinians 83.795
sea shells for a visa, then that's what Argentina will charge me to go there.
Sorry; wrong! Go the the bottom of the class. The Bible's Old Testament is
big on reciprocity: 'an eye for an eye and a tooth for a tooth'; but Jesus knew
better, saying that you should 'turn the other cheek'.
Reciprocity is what leads to trade wars and protectionism. You put a duty of
50% on my bananas, so I put a duty of 50% on your beef, and before you know
it, trade volumes have slumped away to nothing. These sort of duties are especially
popular – and damaging – in the EU, where they are frequently termed
'countervailing' duties. They are closely related to 'anti-dumping' duties,
which should really be called anti-consumer duties.
If another country, or a manufacturer in another country, wants to sell off
its surplus production at cost into my country, in order to help its cash flow,
then the right response is for my country to say thank you very much and allow
consumers (or manufacturers wanting that type of input) to take advantage of
the lower prices that result. But of course that isn't what happens: the over-priced
and usually highly unionized firms in my country which are damaged by the extra
competition go wailing to the government (or the Commission in the case of the
EU) and demand an anti-dumping duty to set them right. And they often get it,
thus putting off the day when they might have to do something about their antiquated
methods and under-skilled work-force.
'Social dumping' and its cousin 'fair trade' are other forms of reciprocity
and are equally damaging to long-term competitivity and the interests of consumers.
'Social dumping' is when your country exports products to mine which have been
made by workers who don't have the gold-plated working conditions that make
my country uncompetitive. Taken to its logical conclusion, the principle of
fair trade would ensure that all manufacturers around the world are equally
uncompetitive, and indeed this is what its woolly-minded proponents do actually
want. Unfortunately for them, that's not how human nature or the markets work.
There are better ways of protecting the interests of young children and oppressed
working populations than with the sledgehammer of reciprocity, although they
require long-term effort and investment on the part of developed countries.
But it is seldom in the interests of politicians to look to the long term, and
consumers are not educated to understand their own best interests – they
are economically illiterate in most cases – so that the electorally popular
sledgehammer continues to be used, to everybody's disadvantage other than the
narrow mercantile class that called it down.
Sorry to be a bore. I promise not to preach this sermon again for another 12
months!
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Latest
25 entries from all other blogs:
13 December 2009
No Pensions, Please, We're British
22 November 2009
The Ex-Wives' Charter, Norwegian Style
18 October 2009
To Will Or Not To Will?
03 May 2009
Time To Get Out Of Money?
04 April 2009
A New Economic Order
22 March 2009
Asset protection, bearer shares and anonymity
08 March 2009
There's No Fool Like A Gold Fool
19 February 2009
Time To Tax The Vegetarians!
17 January 2009
How Do You Achieve The Lifestyle Of Complete Freedom Without Having The First Million In The Bank?
23 November 2008
Please Securitize Me
19 November 2008
You Don’t Know Until You Go!
28 October 2008
Why the Financial Crisis Doesn't Really Matter
26 October 2008
Is Oil Cheap?
14 October 2008
The British Government’s ‘Ill Considered’ Use of Anti-Terrorist Financing Legislation against Iceland and the Wider Implications
07 October 2008
How and Why You Should Buy Physical Gold Offshore
04 October 2008
Thank You, Mr Paulson
22 September 2008
Scam Busters: Second Citizenship and Passport
05 September 2008
Offshore Banking: Failure to Open a Bank Account
29 August 2008
How to Avoid Envy by Keeping a Low Profile
21 August 2008
High Yield Offshore Investment Programs: Do They Exist?
20 August 2008
Blacklisted Offshore: Private Consultant's Opinion
18 August 2008
Why taking a vacation can improve your health – and wealth!
17 August 2008
Alphabet Soup
11 August 2008
Your Ships Come in Over a Calm Sea
07 August 2008
While Offshore Banking Giants are in Trouble
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