Proposed consumption tax in UK budget plan

[Blondie]

Proposed consumption tax in UK budget plan

Chancellor Osborne announced during a UK budget speech Wednesday plans to introduce a "point of consumption" tax for remote online gambling operators. The Chancellor touched on overseas operators avoiding the flat 15% tax rate on UK-based operations. This legislation is expected to restore the balance between offshore and onshore operators, whilst providing additional revenue for the Treasury.

Chancellor Osborne to the House of Commons: Ninety percent of online gambling consumed by our citizens is now supplied from outside the UK and the remaining UK operations are under pressure to leave. This is clearly not fair and not a sensible way to support jobs in Britain. So, we intend to introduce a tax regime based on the place of consumption, where the customer is based, not the company.

It remains to be seen exactly how the point of consumption tax will be enforced, and if it will become law during the autumn financial statement or during the 2013 UK budget.

[Santo]

I've written about this previously -- it's basically unenforceable. The suggestion is to prohibit advertising, and there was some talk of blocking websites, but given the recent SOPA uproar I don't see any way they go down the second path, and the first would be limited to TV given they have no control over advertisements served online.

Scott Ferguson (UK betting expert) believes it's a measure targeted more at British books operating offshore (the William Hill types) rather than Pinnacle, CRIS etc..

[laconic]

But you can see from the history of the past few years bookmakers have no stomach for defying governments either. If they do not wish to go down the path of licensing and paying 15% on net stakes from british customers then the bookmakers will simply exclude british customers from using their book. This is what they have been doing with other countries, but long term that strategy has no future either.

[Maniac]

The government messed up a few years ago when they brought in the 15% tax rate in the first place which prompted a number of UK based companies moving offshore and takeing the jobs with them - this is simply a way to try to make up for that mistake, though as people have said, it remains to be seen exactly how successful it will be !

[JayZ]

From 1968 until 2001 a direct levy was paid by the punter, with the choice of paying it on the stake or winnings if any. For most of the time this was 10% but was shaved down to 9%. Internet / telephone betting was moved offshore to avoid this, including the then state-owned Tote.

There was then a 'gentlemen's agreement' between the government of the day and UK high street bookmakers to scrap this levy from shops, if their internet / telephone operations were brought back onshore for UK based customers, to be replaced by a 15% gross profits tax.

However, this was not legally binding, and Ladbrokes and William Hill relocated their online businesses back offshore in 2009 (although the Tote and Coral sports operations remain in the UK at the moment), and others have gone offshore since such as Betfair. The reasons for them doing so were not all directly tax related - 2009 was a bad year for bookmakers in general, attributed by them to unfortunate results in football and racing, as well as the general recession.

If this gentlemen's agreement had not been broken then there would have been no need for the latest moves.

In another measure any bookmakers who operate from the UK selling into non-UK markets will get relief from double taxation if there is a point of consumption tax operating in these markets.

[HeeeHAWWWW]

Offshore books are just going to ignore this.

Then the question comes: will the government take the only measure in response they have available, and try block those sites or impede financial transactions with them?

It's unfortunate moneybookers is based in London.

[JayZ]

An HM Treasury consultation document on this has been published recently.

Enforcement would seem to rely on voluntary compliance (which could be expected in particular for those with UK physical shops), & mutual assistance from other countries and ultimately extradition. Nothing is mentioned relating to attempting to block off financial transations, although I suppose this could come under 'mutual assistance'.