Is New UK iGaming Laws Destabilizing Online Business Confidence?

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Wednesday, December 17th, 2014 | Written by Charles Washington

A new UK iGaming law designed to level the playing field between UK and overseas operators may be having a detrimental effect on business confidence and making the UK an unattractive market to base online operations, according to Chief Executive of the Gibraltar Betting & Gaming Association (GBGA). CEO Peter Howitt made his comments whilst talking to eGaming Review, stating that online operators’ confidence in the UK had fallen, and that the UK government was failing in its responsibility to support the industry.

Gibraltar A Haven For iGaming Operators

Gibraltar has a large highly skilled service sector with more than 3,000 people specializing in the online gambling industry. The past two decades has seen the island’s government entice online gambling companies to set up shop in Gibraltar by offering low tax rates and a range of other incentives, leading to Gibraltar having one of Europe’s fastest growing economies, and an unemployment rate of just 6%. As Peter Howitt explains:

“[Gambling] is estimated to constitute as much as 25 percent of the GDP of Gibraltar, and it contributes millions in corporation tax, gambling duty [and] PAYE from the thousands of people employed in the industry.”

A Level Playing Field?

In an attempt to protect its domestic online gambling industry from overseas competition operating out of such jurisdictions as Gibraltar, the UK government introduced its Gambling Act recently, which includes a ‘point of consumption’ system requiring all internet gaming operators offering their products in the UK to first obtain a remote gambling licence. Elaborating on the new piece of legislation, Exchequer Secretary to the Treasury, Priti Patel, said:

“The new rules will provide a fairer tax system for all gambling operators. Those businesses that moved their operations abroad to avoid paying UK taxes will now have to pay their fair share of tax. The Government has created a level playing field across the gambling industry so that all gambling by UK consumers is now subject to UK tax.”

UK’s Loss Is Gibraltar’s Gain

The new regulations were launched soon after the UK Gambling Commission (UKGC) released its financial figures for the UK gambling market revealing an impressive 6% growth in gross gambling revenues to £6.8 billion ($10.6bn) between April 2013 and March 2014, with remote betting representing the biggest growth market (+22%).

However, Gibraltar’s Peter Howitt says he believes the UK government risks undoing some of the gains noted in its domestic industry, and that more should be done to encourage a more positive relationship between the government and operators for the good of the UK online gambling economy. Still, Gibraltar still stands to gain from the situation, and as Peter Howitt continues:

“The way the UK has gone about recent changes to regulation and tax has destabilized the confidence in the UK for some operators.. We are seeing a bit of consolidation in the gambling hub space in terms of jurisdictions and I think Gibraltar is going to do well as there are factors here that don’t apply in others jurisdictions.”

A Fresh Legal Challenged Planned

Despite Howitt’s claims that Gibraltar’s online gambling sector is set to gain from the UK’s restrictive new law, he still said the Gibraltar Betting and Gambling Association (GBGA) intends to launch a new legal challenge in 2015 against the 15% Point Of Consumption tax. The GBGA’s initial challenge argued that the new legislation was “illegitimate, disproportionate and discriminatory interference with the right to free movement of services guaranteed by Article 56 TFEU,” and while the case was ultimately rejected, the organization did at least succeed in delaying implementation of the regulation intended to come into effect on 1st October.

A Potential Model For Other European iGaming Markets?

When the UK government first touted its new Gambling Act, it had been hoped the legislation would act as a regulatory framework for other European countries such as Spain, Italy, France, and Belgium to follow. By not ring-fencing UK players from the rest of the world, a vibrant industry providing lucrative taxes could be maintained, while requirements that online gambling operator do not derive more than 3% of their revenues from grey markets offered the potential to transform the global iGaming market. Before such a scenario becomes possible, however, there appears to be a number of challenges associated with the new legal landscape which will first have to be overcome.