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Ladbrokes May Write Off £5 Million To Leave Gibraltar And Return To The UK

Amanda Banks, Tax-news.com, London

27 February 2001

One of the UK's leading gambling companies, Ladbrokes, has hinted that it may consider relocating its offshore bookmaking activities back in the UK if Chancellor Gordon Brown provides for a more favourable betting tax regime in the upcoming budget on 7 March.

This is despite the fact that Ladbrokes has admitted that it would have to write off an estimated $5 million to move back to the UK. But Chris Bell, Ladbroke's chief executive, said last week: 'It would be easier coming back than it was setting up in Gibraltar and there would be no disruption to business.'

He added: 'Figures produced by Europe Economics suggest that nil deductions would result in a 40 per cent turnover increase. In our view, that's achievable. Even so, an increase of one-third is definitely in the realm of realism. But it wouldn't be achieved by sitting on our backsides and waiting for customers to come into the shops or get on the phone. We've already talked of an industry advertising campaign to push a zero-deduction situation. It would be a great fillip, and there's no doubt we would be in a position of great opportunity for growth in all three distribution streams—the shops, over the phone and through e-gaming.'

Ladbrokes is a big enough company to withstand such a multi-million pound loss, but its withdrawal from Gibraltar could result in severe damage to the Rock's local economy since the company currently employs over 200 local people.

But the UK government is also concerned over the loss of revenue it has incurred since a number of bookmakers followed the lead of Victor Chandler in relocating offshore. It is estimated that the Treasury is losing approximately £50 million a year in betting duty from telephone bets alone. Currently the Treasury is seeing about £430 million a year in betting duty.

Gordon Brown is considering the possibility of replacing the current 9% betting tax with a 15% tax rate on bookmakers' gross profits. In return they would have to cease their offshore operations and return all operations to the UK. Initially the new 15% would likely cost the government £150-200 million in lost revenue, but this is expected to be compensated by an estimated betting turnover growth of between 25-50 per cent under the proposed system.

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