Changes to the UK Gambling Act could have a negative effect on Online Gaming

Changes to the UK Gambling Act could have a negative effect on Online GamingThe British government’s Department of Culture, Media and Sport is considering changes to the Gambling Act which will impact on both online gaming operators and players. Proposed changes include requiring all operators which access the UK online gaming market, whether British or from overseas, to have a Gambling Commission licence to operate in Britain.
A tax may be levied on internet gaming and on bets by players.In response to these proposed changes William Hill, a major UK bookmaker which provides both online, mobile and land based gaming and betting services, commissioned a report from Deloitte. Deloitte which delivers audit, financial advisory and tax services worldwide claimed in its report that there could be major movement of up to 40% by British online players to unregulated online gaming sites as a result of tax changes. This figure of 40% migration to unregulated markets is based on a 15% tax on international operators but if the proposed tax were to be 10% it could still mean that up to 27% of players could leave the regulated market. Deloitte also stated that even if a tax of 5% were to be put in place that the more marginal operators could leave the UK market altogether.Current gaming revenue of about 1.7 billion pounds sterling annually of which just under a fifth comes from online gaming, would be greatly impacted by the proposed “point of consumption” tax on online players. Many online gaming operators offering their services in the UK now avoid the 15% tax on internet gaming by placing their operations offshore. Many of the European online gaming operators who offer their services in the UK may pull out of the market bringing their British clients with them.

Since the British gambling industry is worth billions of pounds Deloitte has indicated that there could be a knock on effect on the British economy if such a tax were to be imposed on all online gaming operators offering services in the UK. Players may be encouraged into the unregulated online gaming market, regulated operators would see a possible reduction in their revenue and this in turn could mean reduced spending on sponsorship and advertising which could impact on corporation tax income. William Hill, which commissioned the Deloitte report, issued a statement regarding the government’s “Treasury Statement on Remote Gambling” expressing the wish that “the review fully takes into account the commercial impact of any change before any decisions are made.”

The hope is that the study be Deloitte will have some influence on the decision by the UK government to propose changes to the Gambling Act which would alter the tax regime for online operators and thus affect online players.

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