Report - New UK Gambling Tax Could Backfire

According to a confidential UK gambling tax report commissioned by William Hill, if the UK government goes ahead with plans to charge a 10% point of consumption tax on gambling operators, many UK gamblers would move over to unregulated sites, while smaller gambling operators would be forced out of the market.

Details of the William Hill gambling tax report, which was compiled by accountants Deloitte and submitted to the UK Treasury, were leaked to The Daily Mail. This comes at a time when the Treasury is reviewing plans to change the UK tax regime on remote gambling.

While the government's objectives for introducing the taxes include the protection of consumers, the William Hill report shows that it may produce the opposite effect, and that up to 27% of revenues would, instead, be redirected to "grey" markets.

The report also showed that if the government increased the proposed tax to15%, as much as 40% of the £1.7 billion spend by UK consumers at online gambling companies would go to unregulated sites.

The situation at present is like this: Gambling operators located in the UK are subject to a 15% gross profits tax which the government levies on them. To escape this heavy tax, many top UK gambling groups such as William Hill and Ladbrokes have their bets routed via servers in Gibraltar and the Isle of Man.

Government to Tax Gambling at Point of Consumption

To combat this, in the middle of last year the UK government announced plans to begin reviewing the current gambling laws, with the objective to change the regulation of online bets at their point of consumption. This means that any gaming operator wishing to offer their services to UK gamblers will first need to obtain a license from the UK Gambling Commission - forcing them to pay the gross profits tax.

There is still no consensus as to the 'fair' rate of the tax, and the current debate is whether it should be 10% or 15%.

According to the report commissioned by William Hill, smaller operators, which provide for 13% of the bets placed in the UK, would have to leave the market even if only a 5% tax was introduced, while that percentage increased to 40% if a 15% tax was enforced.

Speaking about the threat of UK gamblers moving their gaming sessions to unregulated sites, the Chief Executive of William Hill, Ralph Topping said: "Money will always find a way out. More people will go overseas or to fly-by-night, unregulated sites where the consumer is not protected. I hope the government sees the sense in this."