British Offshore Islands Offer On-Line Casino Licenses

by Justin Gorringe, Tax-News.com, London

18 September 2001

The first three Isle of Man on-line casino licenses are due to be awarded on Thursday this week to Stanley Leisure, Sportech and MGM Mirage, each of which will pay a license fee of £80,000 ($120,000) a year to the Manx government. Eleven firms are thought to have made serious applications for licenses, including major US operators Park Place Entertainment and Harrah's, and the Island plans eventually to issue a further nine licenses, making twelve in all.

MGM Mirage, one of the largest US-based casino groups, was created from the merger of Mirage Resorts and MGM Grand last year, and is the first US casino to set up an offshore internet site. Offshore bookmakers and casinos have traditionally serviced the US market from Caribbean tax havens, but MGM preferred a British Isles internet casino licence, which it believed would carry more kudos and be more marketable.

AIM-listed Sportech will use its Liverpool-based Littlewoods Leisure brand for its on-line casino. Sportech, which is backed by Trevor Hemmings, the leisure entrepreneur who owns the Blackpool Tower, bought the Littlewoods Leisure business, which includes football pools, telephone betting and online gaming, for £160m a year ago. Earlier this month Sportech posted the first results since the acquisition, reporting an operating profit of £9.3m.

Alderney, a rival offshore jurisdiction forming part of a loose confederation with Guernsey, another British 'dependent territory' plans to issue six on-line casino licenses before the end of the year. The tiny island - which is just 3.5 miles long and 1.5 miles wide with a working population of just 1,300 has already issued several on-line betting licenses (at a bargain basement £50,000 - $80,000 - a year each) and expects to attract "major names" from the United States, Canada and Australia. Park Place Entertainment is understood to be in negotiations with Alderney as well as the Isle of Man.

Internet casino licences are not available in the UK itself. The Budd review of gambling legislation published in July recommended the issue of online casino licences though the relevant legislation could take years to be approved, and the ability of the British mainland to compete with its offshore dependencies low-tax regimes has to be in question. As self-governing Crown dependencies, the Isle of Man and Alderney are not part of the UK and are therefore able to offer casino internet licences.

Few countries permit online gambling and some lawmakers, particularly in the United States, are seeking complete bans on the industry. Industry reports however have estimated that the market will be worth $5bn within five years.

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