GBGA Asks for Judicial Review of UK Point of Consumption Tax

The Gibraltar Betting & Gaming Association (GBGA) is continuing its challenge against changes to the United Kingdom’s regulatory and licensing changes for gambling-service providers by asking for a judicial review of a recent High Court decision which went against the GBGA’s interests, specifically challenging whether the new 15% “UK point of consumption” tax called for under the UK Gambling Commission’s soon-t0-be-enacted rules runs afoul of European Union trade agreements.

uk-flagThe latest filing again protests the latest series of revisions to the UK Gambling Act by asserting its illegality under related EU treaties, writing in part, the “new tax regime breaches Article 56 of the Treaty on the Functioning of the European Union (TFEU) in that it amounts to a restriction on the free movement of services.  That restriction cannot be justified under Article 52 TFEU, since the new tax regime has been introduced in pursuit of an illegitimate aim.”

That “illegitimate aim,” according to the GBGA filing is to prevent operators such as the one-time British members from fleeing to offshore tax havens to offer their services — which in reality, is what those operators have done — and thus violated EU code regarding the “freedom of establishment” for where to house one’s enterprise.

According to the GBGA’s latest filing, “The main aim of the new tax regime is to discourage remote gambling operators from moving to foreign jurisdictions and offering their services to UK consumers from those jurisdictions. This aim is contrary to the very essence of the EU rights of freedom of establishment and freedom to provide services guaranteed by Article 56 TFEU.”

The GBGA continues to represent nearly two dozen major European gaming firms, and is comprised in large part of one-time British gambling companies who repatriated to Gibraltar to take advantage of a virtual tax-free arrangement offered by the semi-autonomous British protectorate beginning in 2005.

The GBGA’s previous challenge to the new UK gaming regulations was dismissed in its entirety by High Court Justice Sir Nicholas Green nearly two weeks ago.  The GBGA announced that it would not mount an appeal to that decision, but would instead take the alternate course of the judicial review, which allows the Gibraltar group to refocus its legal challenge to a certain extent, on the point-of-consumption tax which the firms, naturally, are seeking to not pay.

The hotly-contested point-of-consumption tax has been in the works since 2012, and is the principle means by which the UKGC hopes to repatriate tax revenue it believes it is owed to the country from wagers taken from UK bettors.  More than half of all United Kingdom gambling action has been redirected away from traditional gambling shops and into online sites and services, such as those of GBGA member firms, over the past decade.  The 15% taxation rate previously applied only to in-person bets, and not to remote wagering.

The judicial review, indirectly, also hopes to challenge the ruling made by Sir Justice Green in his initial decision that the EU-based claims made by the Gibraltar-based group are by themselves invalid, since EU trade countries govern business relationships between separate EU member countries, and not between an EU member and its own protectorate territory.  Gibraltar is considered part of the EU and the European Economic Community, but is exempt from some EU treaties and is not part of the EU’s customs union or VAT (value-added tax, another form of a consumption tax) area.

Separately, the GBGA issued a public comment of Sir Justice Green’s initial decision in which the group expressed its “disappointment” in the decision.  That brief statement, in its entirety:

“Naturally we are disappointed with the Court’s decision. Cross-border regulatory regimes require significant co-ordination and co-operation on key legal and regulatory issues and the UK already had this with the Gibraltar industry, regulator and jurisdiction. We maintain this law is not in the best interests of consumers, the industry and the regulator itself and that there are more effective ways of dealing with the challenges of regulation and competition in this sector. We remain concerned the UK regulator will find it difficult to hold companies to account in jurisdictions outside of the EU where it has no legal powers and common legal framework or culture. Given this judgment there is now even greater need for an EU legal framework for online gambling if we are to effectively protect all European consumers, enjoy a common market and avoid each Member State deciding alone how to deal with an activity that naturally crosses borders.”

One aspect of the latest challenge, the judicial review, is that it may again delay the starting date for when the new point-of-consumption tax is actually assessed.  The GBGA’s initial legal challenge succeeded in delaying implementation of the new Gambling Act changes by 31 days, from October 1st to November 1st.  If the judicial review lasts for several weeks, it could force a similar brief delay in activation of the new tax, which will go into effect on December 1st if upheld.  Other portions of the law remain unchallenged.

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