The UK Department of Culture, Media, and Sport (DCMS) published the draft of the Gambling (Licensing and Advertising) Bill on Monday. This bill serves to amend laws so that gambling operators who run their gambling business in the UK will be required to get a license from the UK Gambling Commission and pay taxes on every bet accepted from UK citizens.
Amendments to this bill were first proposed in the middle of 2011, shortly after the US federal government crackdown on major online poker rooms. The proposals were accepted in the budget of 2012, and the law could be implemented by 2014.
As per the existing gambling laws, the UK Gambling Commission was established to license and regulate online gambling as well as traditional gambling in the UK. The Gambling Act, which was passed into law in 2005, required all UK-based gaming operators to get a UK license and pay 15% of their gross profits as taxes to the UK government.
A white list of offshore gambling jurisdictions was also created and gambling operators were allowed to accept bets from UK gamblers without paying taxes to the UK government as long as they had a license from any of the gambling jurisdictions on the list. The white list included jurisdictions such as Tasmania, Antigua and Barbuda, Gibraltar, European Economic Area, Isle of Man, and Alderney. As a result of this provision, several UK-based gaming operators shifted their base to avoid having to pay taxes to the UK government.
The bill will now be amended such that the location of the consumer and not the gambling operator will be taken into consideration to determine the amount to be paid as taxes. According to the new law, poker rooms will have to pay taxes on rake collected from UK-based poker players.
Several operators felt that the current tax rate of 15% is too high, owing to which the amended bill refrains from specifying any rate. Instead, the draft reports that several operators moved offshore because they felt that the 15% tax rate was too high, and if this rate was maintained while making the switch to consumption tax, at least 40% of gambling operators in the UK will just leave the market.
The draft bill’s impact assessment report states, “the proposals are cost- and benefit-neutral to British-based remote gambling operators, as there will be no additional costs and may even be some … marginal net benefits in relation to fees.”