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The Geese Are Dead

Jeremy Hetherington-Gore Unleashed
10 January, 2010

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'.


About the Author

Jeremy Hetherington-Gore Unleashed

Jeremy tackles the difficult issues head on!


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