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An Overview of the Upcoming Changes in UK Gaming Licensing & Tax Regulation

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The UK’s gambling laws are set to change, enabling the government to tax gaming firms located overseas. It has recently been announced that all gambling operators offering bets to customers in the UK will be required to hold a UK license irrespective of where they are based. The changes are designed to stop offshore operators having an unfair advantage over UK-based competitors – which have to deal with a 15% gross profits tax, on top of corporation tax and VAT – as well as to provide increased protection for British customers gambling online.

So, what do these changes mean for offshore operators and affiliates? When are these changes due to be implemented? And how can the UK prepare for the changing legislation?

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An Overview of the Upcoming Changes in UK Gaming Licensing & Tax Regulation

  1. 1. Presentation bySteve DonoughueAN OVERVIEW OF THE UPCOMING CHANGES INUK GAMING LICENSING & TAX REGULATION
  2. 2. WHO AM I? Steve Donoughue – management and political consultant specialising in the gambling industry since 1995 www. Gamblingconsultant.co.uk Secretariat to the Parliamentary All Party Betting & Gaming Group Special Adviser to the Culture, Media & Sport Select Committee inquiry into gambling Clients in every sector, channel of gambling industry
  3. 3. A QUICK HISTORY LESSON 1993 First (mostly US facing) internet gambling sites appear in Caribbean – the „wild west‟ 1993 National Lottery Act etc. 1994/5 Victor Chandler uses Caribbean jurisdictions to offer tax-free telephone betting to Asian clients 1996 Victor Chandler gets telephone betting licence in Gibraltar – many big bookmakers start moving their telephone betting offshore 1997 Alderney issues telephone betting licences 1997 Gaming Board for Great Britain argues need for review of gambling laws and need to accommodate internet gambling 1998 Sportingbet gets internet betting licence on Alderney 2000 Budd Review set up 2001 UK changes betting tax from 9% on stake to 15% GPT in attempt to woo bookmakers back 2001 Budd review recommends National Licensing of internet gambling
  4. 4. MORE HISTORY (KEEP AWAKE AT THE BACK)  Budd recommends:  that an on-line gambling operator seeking a licence from the Gambling Commission should, at the minimum:  be registered as a British company  locate its server in Great Britain and  use a UK web address for its gambling site (recommendation no.137)  that on-line gaming should be permitted (recommendation no. 139)  that the Gambling Commission establishes a portal on its website, listing licensed online gambling providers. In addition, regulated sites should display the Gambling Commission‟s kitemark. It should be an offence for an operator to claim falsely that a site is licensed by the Gambling Commission, or to make unauthorised use of the kitemark (recommendation no. 149)  that only on-line gambling sites that are licensed by the Gambling Commission should be permitted to advertise in Great Britain (recommendation no. 150)
  5. 5. NEARLY THERE 2001 Isle of Man legalises online gambling 2002 Govt. White Paper „A Safe Bet for Success‟ rejects idea of national licensing on basis that it ignores third party servers 2003 Pre-legislative Scrutiny Committee set up to look at Gambling Bill 2003 Draft Gambling Bill published, main focus is on casinos. For remote gambling: two key concepts put forward are that the gambling takes place where the server was located (and thus that is where it should be regulated) and that with UK regulation, operators and customers would be attracted by it stringency, „The draft Bill does not prevent British consumers from gambling with offshore operators, but it would be surprising if they felt the need to do so once the new regime is in place. The Government‟s firm belief is that this newest sector of the British gambling industry can establish itself as a world leader‟ 2004 Malta becomes first EU State to formally licence online gambling
  6. 6. JUST A LITTLE BIT 2004 Pre-leg scrutiny committee publishes its report: Recommendation 115: The regulation of remote gambling operators should not be delayed. The licensing regime proposed in the draft Bill should be introduced at the earliest opportunity and preparations for the licensing of remote gambling operators should commence as soon as possible Recommendation 124: Recommend that the Bill should instead contain a general prohibition on advertisements from non-EEA operators but that the Gambling Commission should be able to designate non-EEA territories as permitted if it is satisfied that the standards of regulation in those territories are adequate. DCMS realise could not stop offshore targeting UK, so wanted to ensure consumer protection, White List franchises out high standards. Tessa Jowell admits they ran out of time in finding an elegant solution Gambling Bill gets first reading in House in October 2004 and Second Reading in November 2004 Gambling Bill gets Royal Assent 7th April 2005
  7. 7. JUST A LITTLE BIT MORE Gambling Commission takes over from Gaming Board 1st October 2005 October 2006 Ascot Racecourse Online Gambling Summit – attempt at shared regulatory principles for all 33 countries. March 2007 Remote Gambling Tax set at 15% - According to Caborn HMT is dismissive of having an online gambling industry onshore August 2007 Isle of Man & Alderney put on White List – Antigua rejected Gambling Act 2005 comes into force on 1st September 2007 November 2008 DCMS added Antigua to its list of approved jurisdictions after “a reconsideration of Antigua‟s application following further representations made to the Secretary of State.” Rumours are that Antigua is licensed because of WTO deal, friendship between chief regulators and that White List regulations so badly written that Antigua could not be refused (rumour that current suspension of White List is maintained because
  8. 8. YOU KNOW WHAT I’M LOOKING FOR The Gambling Commission does not physically visit any of the jurisdictions on the White List February 2009, Parliament‟s Third Delegated Legislation Committee considering the Statutory Instruments which added Antigua, to the White List. Both the Lib Dem and Conservative Spokesmen on Gambling argued that the present system for checking if White Listed jurisdictions maintained strict enough controls on their licensees weren‟t good enough March 2009 Westminster Hall Debate on Online Gambling where more opposition MPs focussed on offshore operators not paying their share of funding for research and the Schaldemose inspired idea that internet gambling was destroying the very integrity of sport April 2009 Gambling Commission closes the White List as it assists DCMS with an internal review into online gambling regulation 7th January 2010 Ministerial Statement on Remote Gambling Policy and announcement of consultation on new licensing regime for online gambling March 2010 Public consultation starts
  9. 9. OOH AHH! Government outlines need for change based on:  UK punters not getting consumer protection  No suspicious betting activity reporting  No contribution to gambling R,E&T  Operators moving offshore cause operators to move offshore (?)  Differences in standards and software testing  No organised crime and sports integrity reporting  No covering of Commission‟s costs Govt. proposes national licensing with quasi White List June 2010 Consultation closes 14th July 2011 Ministerial Statement on Remote Gambling Policy proposes national licensing and phasing out of White List 18th July 2011 Economic Secretary to the Treasury, Justine Greening, announced review of remote gambling tax. Consultation closed 30/11/11
  10. 10. OPPOSITION Offshore jurisdictions opposed as it severely damages their business model Number of operators have expressed their concerns at additional bureaucracy and revenue raising Make point that reasons for change are rubbish – which is valid Argue that national licensing will create additional cost & bureaucracy which will force marginal operators into grey market – not much evidence of grey market as consumer choice mostly based on brand and these not marginal players Point out that Gambling Commission has little experience of online regulation and doesn‟t have the capability to handle 400 licensees – which is certainly true Obvious question is how will it be enforced when operators offshore? BUT KEY TO ALL OF IT IS THE TAX RATE
  11. 11. WHEN AND IF? Can be pretty much certain that will happen as DCMS has tried to get it in to Queen‟s Speech (May 2012) Reshuffle in July 2012? – Will Hunt stay (tipped for promotion)? Will Penrose stay (seen as indecisive)? Possible 2010 intake replacement Olympics in July – success of which will determine DCMS future and ability to get legislation Could be in 2012/13 session as 2013/14 tabled for big Communications Bill and only get 1 Bill per year. 2014/15 is Election Persistent rumours that DCMS to be disbanded after Olympics Treasury support will be key - this is a revenue raising exercise after all Still opportunity to kick it in to the long grass it with concerted lobbying showing how it will a) not raise enough and b) be regulatory minefield (need to show Gambling Commission is incapable)
  12. 12. THANK YOU Please go to my website www.gamblingconsultant.co.uk Now over to Peter Wilson Who will discuss what the new law could look like

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