Controversial UK Gambling Bill Set for Final Vote in the House of Commons

Tuesday, May 20th, 2014 | Written by April Bergman
Controversial UK Gambling Bill Set for Final Vote in the House of Commons

Three related taxes on gambling revenues are making business difficult for gaming operators in the British market. Two of the levies were applied in March 2014, but the largest and most far-ranging of the three taxes has yet to go into effect.

On December 1, 2014, the UK Gambling (Licensing and Advertising) Bill will be imposed on gambling operators who accept betters from the United Kingdom. The new law will impose a 15% point-of-consumption tax on foreign-based gaming operators who accept bets on UK customers and who require a license from the UK Gambling Commission.

Industry groups like the Remote Gambling Association have been opposed to the measure since it was first announced in 2012. William Hill plc even considered legal action to head off the new taxes. Despite much hand wringing on the part of the European online casinos, sportbooks, bingo sites, and poker rooms, the last hurdle to imposition is looming.

House of Commons Set to Confirm POC Tax

The House of Lords gave its final approval of the bill on March 29. The final chance for the UK gaming industry to avoid the tax is in the next few weeks, when the House of Commons has an up-or-down vote on the bill. Such a vote is expected to occur before Parliament begins its summer break.

If the vote is affirmative, the Gambling (Licensing and Advertising) Bill could go into effect as early as summer 2014. United Kingdom Chancellor of the Exchequer George Osborne continues to say the Point-of-Consumption tax will go into effect on December 1, 2014.

POC Tax Provisions

Several amendments have been made to the POC Tax law since UK lawmakers first took up the matter. A horse racing levy was announced on March 4 of this year, which sent the stock prices of some of Europe’s biggest bookmakers plummeting. The Horseracing Betting Levy is said to be a statutory levy on the gross profits of bets. The Horseracing Betting Levy Board was given the authority to collect these revenues.

The levy’s purpose was to boost the British horseracing industry by instituting special tax burdens on offshore horse racing operators. For years, the British horse racing industry has said that it was operating at a disadvantage

Helen Grant, UK Minister for Sports and Gambling, released a statement which said, “We want to see British horseracing, an industry that supports thousands of jobs across the country, continue to thrive and extending the Levy to offshore remote operators will help do exactly that.

Commenting on the Horseracing Betting Levy, Paul Bittar of the British Horseracing Authority added that the law “will close a loophole that has significantly undermined the funding of our industry for a number of years.

Announcement of Fixed-Odd Gaming Machine Tax

A new 25% higher tax rate was imposed on fixed-odds gaming machines, which is expected to draw in £335 million over a five year period. The announcement of this particular tax increase caused the stock of Ladbrokes, William Hill, and Gala Coral to drop significantly. On the day investors first learned of the tax increase, Ladbrokes lost 12% of its stock price, while William Hill lost 7%.

Fixed-odds betting terminals or “FoBTs” have been controversial in the UK for years. B2 machines were dubbed the “crack cocaine of gambling” by an American politician, a phrase used the Labour Party members who have called for a crackdown on FoBTs.

Response from British Bookmakers

When the new tax was announced, one industry insider said the Chancellor was using the gambling industry as a “political football“. The Association of British Bookmakers released a statement: “The licensed bookmaking industry is the only sector in the UK that pays more in tax than it generates in profits. The Government’s desire to continue to soak the industry undermines our ability to continue to support horse and greyhound racing.

Gibraltar Concerned for It Gaming Status

Over the years, Gibraltar has become a haven for UK gambling companies. The British crown dependency acts as an offshore tax haven, while maintaining a British legal structure. Since the UK Gambling Bill was proposed, Gibraltar’s leaders have expressed concern that one of the underpinnings of the Rock’s economy might be lost. For its part, William Hill plc says it expects to remain in Gibraltar, whatever its tax status is.

One favor the UK government did the gambling industry is announce the coming changes in 2012, a full two years before the new taxes would increase. Such a warning allowed William Hill time to shift its assets to overseas businesses. For instance, William Hill bought Sportingbet and Tom Waterhouse, a pair of bookmakers active in the Australian gambling market. Ladbrokes bought and Betstar, hoping to diversify its global gaming portfolio. With the capital they have collected from UK gamblers over the years, such businesses should be able to adapt to the new tax climate.