Are offshore Internet gambling companies benefitting from the UK market in for a hard time?

Industry rumour that the UK government may be considering its tax options on offshore Internet gambling companies which advertise and benefit from betting by UK punters took on more substance recently when an official from HM Revenues and Customs confirmed that research was being done on the subject.

Earlier this year there were complaints that offshore companies were benefitting from the UK market without paying levies or UK taxes, fuelling speculation that British-licensed betting companies may have urged government to level the playing field.

This was linked to fears (later realised by the departure of the Ladbrokes and William Hill online operations to Gibraltar) that major UK groups may be contemplating a move offshore to better compete in a more benevolent tax climate.

Clearly worried by the loss in tax revenues, the Department of Culture, Media and Sport (DCMS) announced a review to ensure a more level playing field between British betting businesses and their foreign competitors. Gambling companies used comparisons between British taxes (15 percent) and Gibraltar taxes (1.5 percent) to illustrate the competitive disadvantage they faced.

Coincidentally with the DCMS review, it was revealed that until it was completed, the UK government would not accept any further applications for inclusion in its advertising white list, which enables offshore online gambling companies to advertise in the British media.

It is understood that the hold on new applications is a consequence of complaints from UK licensed gambling companies that offshore rivals have tax and other advantages over them, and that the competitive UK gambling field needs to be leveled.

The review will take a comprehensive look at the policies of other EU governments on gambling; UK betting and VAT taxation in relation to the taxes that offshore companies pay; the ability of offshore companies to market for UK players on UK soil and claimed inequities such as the Board Levy in horseracing.

The Department of Culture, Media and Sport is spearheading the project, and will seek to complete the study by the close of 2009.