Gibraltar Online Gambling Firms Mull Uncertain Future After ECJ Loss
The efforts of Gibraltar’s dozens of resident online-gambling firms to maintain their effective “tax haven” status by operating from the tiny promontory at the mouth of the Mediterranean Sea appear at a conclusion after the ECJ [European Court of Justice] Advocate General ruled against the ongoing complaint by Gibraltar-based firms against the United Kingdom’s recently implemented “point of consumption” tax.
The opinion, offered by ECJ Advocate General Maciej Szpunar, affirms that, “for the purposes of the freedom to provide services, Gibraltar and the UK are to be treated as one entity.” The opinion is itself unofficial but when coupled with the final ruling of England’s High Court, means that the Gibraltar firms will be fully bound by the remote-gambling levy introduced by the UK within the country’s last round of updates, the Gambling (Licensing and Advertising) Act 2014.
Exactly what the dozens of Gibraltar-based gaming firms will do in the wake of Szpunar’s opinion isn’t quite clear. Many of those firms are former British gaming giants that moved from the Isles to Gibraltar precisely to get away from the domestic tax on GGR. After a decade of seeing its tax revenue from gambling services decline — the firms that moved to Gibraltar also found ways to incentivize punters to wager online — the UK’s move to close that loophole resulted in multiple legal challenges by the GBGA [Gibraltar Betting and Gaming Association], an industry group representing many of the nascent Gibraltar operators.
The GBGA and its member firms have tried several different tactics to keep avoiding the table-balancing British levy. Collectively, the UK estimates it has lost hundreds of millions of pounds (or Euros) each year.
The GBGA’s ongoing legal challenges have offered several different arguments for why the firms in Gibraltar, a UK protectorate, should somehow be exempt from the tax. None of them, in this occasional law reporter’s opinion, have been particularly good or convincing arguments, but when big money is involved, everything gets a try.
The ECJ was forced to be part of this last challenge, since the GBGA, on behalf of its member firms, tried to assert that Gibraltar shouldn’t be considered as part of the UK for tax purposes. The GBGA’s legal argument was that the UK’s point-of-consumption tax thus violated the TFEU’s “freedom to provide services” mandate. The complaint was even more strange because Gibraltar itself isn’t even an EU member; it gets a special trade status because it is a UK protectorate.
ECJ Advocate General Szpunar didn’t miss the silliness of the GBGA’s claims. According to the ECJ’s summary of his lengthy ruling:
“[T]he Advocate General notes that it is the UK and not Gibraltar that has assumed obligations towards the Member States in ratifying the Treaties. Logically, therefore, infringement proceedings with respect to Gibraltar are brought against the UK and Gibraltar cannot institute infringement proceedings itself. In the Advocate General’s view, if the freedom to provide services were to apply between the UK and Gibraltar, this would imply, rather strangely, that the UK assumes an obligation vis-à-vis itself. The Advocate General concludes that the application of EU law to Gibraltar does not create new or supplementary rights between the UK and Gibraltar that are in addition to those flowing from UK and Gibraltar constitutional law.
Consequently, Gibraltar and the UK cannot be other than a single Member State for the purposes of the freedom to provide services.”
GBGA CEO Peter Howitt offered this: “We are naturally disappointed with the opinion of the Advocate General. We continue to believe that the gambling duty applied by the UK government to operators out of the jurisdiction, in circumstances where the customer may not be in the UK when they gamble or even a UK resident, is a disproportionate restriction on operators. We look forward to receiving the CJEU’s judgment on the issues.”
Disappointment aside, it looks like all those UK firms that moved to Gibraltar to try to pay less tax to the UK will have to start paying those taxes once again. Whether that falls under “their fair share” is of course open to further debate.
With it tax advantages dwindling, Gibraltar looks a little bit less of the ideal home for major European online-gambling operators. Whether some of Gibraltar’s current resident firms consider relocation to other jurisdictions is also an open, ongoing question.
The GBGA itself also looks a bit toothless these days. Currently, the organization represents 19 firms: 32Red, 888 Holdings, Bet 365, Betfair, Betfred, BetVictor, bwin.party, Digibet, Gala Coral, Gamesys, Gtech, IGT, Ladbrokes, Lottoland, Mansion, Nektan, Stan James, Tombola, WilliamHill. As one can see, former Brit gaming giants dominate the list, and the GBGA’s membership has actually shrunk by a dozen or so firms over the last couple of years.