Gibraltar Gambling Firms Threaten Lawsuit Targeting UK Gambling Act

The Gibraltar Betting and Gaming Association (GBGA) has notified United Kingdom officials of its intent to challenge changes made to British gambling laws which call for a “remote gambling” (point of consumption) tax applicable to all wagering made by Britons via online sites.

uk-flagThe changes, formalized as the UK’s Gambling Licensing and Advertising Act of 2014, call for a 15% tax on all gambling revenue generated by British punters for online bets, equal to the tax rate charged by land-based betting shops.  The changes to the code, which were formally approved last month, target the dozens of one-time UK betting firms who have relocated to the British protectorate of Gibraltar to take advantage of the territory’s tax-shelter framework.  The firms pay a maximum of 1% tax of gross gaming revenue, but with a low cap that makes incorporating in Gibraltar essentially tax-free.

The move by the UK to recapture tax revenue the country believes it is owed has met with fierce resistance from the firms and the GBGA, their organizational front.  The GBGA currently lists as members these 22 firms: 32Red, 888 Holdings, Bet365, BetClic, Betfair, Betfred, bwin.party, Digibet, Gala Coral, Gamesys, IGT, Ladbrokes, Lottoland, Mansion, Nektan, Ongame, Probability, Stan James, Spielo, Tombola, Victor Chandler and William Hill.

The GBGA and its member gambling companies immediately announced their intention to combat the new code upon its formal approval last month.  At issue is more than £300 million in annual potential online gambling-related tax revenue.  The gambling firms have succeeded in converting over 60% of their action from UK punters into online betting action, rendering it exempt under the old rules; Betfair alone, which relocated to Gibraltar in 2011, stated that the move saved it approximately £20 million in annual gambling taxes.

As part of its effort, the GBA has sent a notice of its intent to challenge the new code within the next 14 days.  The letter, stretching to 18 pages, was sent to UK Attorney General Dominic Grieve, Secretary of State for Culture, Media and Sport Sajid Javid, and the UK Gambling Commission.  The letter originated from the Gibraltar legal firm of Olswang LLP, which is representing the GBGA member firms in the matter.  Several Gibraltar governmental gambling officials were also included in the communication.

The formal complaint, as offered to the UK offices, is that the new code breaches European Union treaty by creating a “disproportionate and unjustified interference with the right to free movement of services.” The claim was made despite the presence of several EU member countries, including France, Spain and Italy, who have successfully walled off their online-gambling markets from the rest of the European Union.

 

Since Gibraltar remains a UK protectorate, the one-time UK firms who have relocated there are also threatened by the legal sanctions and fines specified under the new code should they fail to comply with the tax levy.  However, the lengthy 18-page missive sent to the UK officials, formally called a “pre-action protocol,” never once includes the word “tax,” while declaring that the new code as planned actually gives a competitive advantage to perceived unlicensed operators.

The GBGA also issued a press release designed to draw support for its position on the matter, which the GBGA claims is unlawful and “threatens the safety of consumers.”

According to GBGA Chief Executive Peter Howitt, “This is bad for UK consumers, bad for the regulated industry, bad for Gibraltar and is in breach of European law, but fantastic news for operators who choose to avoid proper regulation.

“We know of no precedent where any regulator in any industry will be granted the role of licensing and regulating operators all over the world in this way,” continued Howitt, “threatening to criminalise companies and people who fail to submit to its regime. This is plainly unworkable. The likely impact of this legislation will be to drive UK consumers towards unregulated or poorly regulated operators, leaving them exposed to unnecessary risks. This Act allows operators from 165 new jurisdictions to gain licences to operate and advertise in the UK and the Gambling Commission is supposed to regulate this industry with no extra-territorial information gathering or enforcement powers. Clearly that spells a new danger for British consumers.”

Added Olswang LLC council Dan Tench, “The Government announced that this law was introduced with the express intention of addressing concerns it said it had about the protection of consumers. The measures introduced through this Act are neither reasonable nor proportionate to achieving that goal and are likely to have adverse consequences for consumers. All this Act achieves is a wholly unjustified, disproportionate and discriminatory interference with the right to free movement of services, a right enshrined in European Law. For these reasons the Government must reconsider this law or we shall have no option but to ask the courts to review it for them.”

 

 

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