UK Gambling Commission Issues Deadline Warning to Offshore Firms

The United Kingdom Gambling Commission has issued a deadline warning to offshore gambling firms to complete application with the regulatory agency in order to be permitted to continue marketing and advertising to UK-based punters.  The applications are required as part of the controversial new Gambling (Licensing and Advertising) Act, which is set to go into effect on October 1st.

Applicant companies have until September 16th to initiate that application process.

uk-flagThe aim of the new law is to repatriate gambling tax revenue generated from UK-based bettors.  Dozens of the world’s largest gambling companies have relocated to the British protectorate of Gibraltar, which is autonomous for tax purposes.  Many of those companies are originally British.  Gibraltar operates as a tax shelter offering a virtually tax-free base (less than 1% for larger companies) on online-gambling revenue, which has incentivized the gambling firms to relocate their, and to shift as much as their business online as possible.

The UKGC estimates that as much as 85% of the betting activity of British punters is now being redirected through these offshore, usually Gibraltar-based sites, causing a drastic reduction in the amount of tax revenue actually flowing into UK government coffers.  That 85% likely equates to more than £300 million in annual potential online gambling-related tax revenue, which the United Kingdom plans to recover in exchange for allowing the companies to market openly to UK players.

Here’s the meat of the latest update from the UKGC:

The Gambling (Licensing and Advertising) Act is expected to come into force on 1 October 2014.  Offshore gambling operators – currently regulated overseas but transacting with consumers in Britain – wishing to continue to provide services in Britain beyond this date have until 16 September to make an application and pay a fee to ensure their business is not impacted.  Licence applications must be made through the Commission’s website.

The Act will ensure that all remote gambling operators offering services to consumers in Britain are subject to consistent regulation and will bring the 85% of the remote gambling market in Britain currently regulated overseas within the Commission’s remit. This means that the Commission will be better placed to protect players and to respond to and advise the government on emerging player protection and consumer risks and issues.

If an application – made by an operator currently legally transacting with consumers in Britain – has not been determined by commencement of the Act, the applicant will be issued with a continuation licence to enable them to continue to trade until completion of the application process.

The Gibraltar-based companies have stridently battled against the new law, to the point of threatening to challenge it in court.  The Gibraltar-based Gibraltar Betting and Gaming Association (GBGA), which represents dozens of the promontory’s firms, has been outspoken in its attacks on the remote-gambling tax.  The GBGA has done so without ever once mentioned the word “tax,” but instead declares that implementation of the new law would give an advantage to so-called “rogue” offshore operators.

What the GBGA and its member sites decline to address, however, is that should they choose not to comply with the new Gambling Act changes, they would be redefining themselves as rogue as well, meaning willful noncompliance with a regulatory regime.  To date, however, no individual companies have announced that they will refuse to comply with the new law.

The GBGA and its member companies have complained relative to European Union treaties that the new law would implement “disproportionate and unjustified interference with the right to free movement of services.”  However, the new law actually includes no ban on movement of services, as long as remote-tax revenues for those services are paid for in accordance with UK mandate.  The GBGA stance also ignores the reality that several other European Union member countries actively operate firewalls with regard to online gambling.

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