by Renee Israel
Gibraltar has been a tax haven for online gambling operators for years, offering extremely low tax rates and a solid licensing and regulation regime.
Groups such as William Hill, Victor Chandler and Ladbrokes have always seen The Rock as a way to avoid the high taxes imposed on them by the UK government.
Gibraltar, for its part, has always enjoyed income from these group. A recent newspaper article showed that the government earned €12.4 million in taxes from online gambling, charging a rate of just 1% with a tax cap of €500,000 per group.
However, Gibraltar announced recently that it would be increasing the tax rate from 1% to 10% from the beginning of next year.
The government cited the need to comply with European law for this move.
"To comply with EU law we must phase out the tax exempt company system in 2010," said the first minister of Gibraltar, Peter Caruana. "However, in order to sustain our successful economic model we must retain a commitment to a very competitive corporate tax model."
It remains unlikely that online gambling groups will move from Gibraltar, despite the ten fold tax hike.
"Nobody will leave," predicted Victor Chandler, "although we'll all complain about the tax going up."
Online gambling groups will still be spared the need to pay Value Added Tax in Gibraltar, allowing them to still enjoy a competitive tax regime.
In comparison, British based web operations need to pay a 15% gross profits tax and a 10% racing levy.
