Offshore Bookmakers Won't Be Enticed By UK's New Betting Tax Rules Just Yet

Amanda Banks, Tax-news.com, London

09 March 2001

Since the November pre-budget announcement last year, when UK Chancellor Gordon Brown spoke of the recent trend of many major betting operators to relocate their operations offshore to escape the government's heavy betting tax, bookies and punters alike have been anticipating this week's budget with bated breath. On Wednesday, the long-awaited budget confirmed the scrapping of the 9 per cent betting duty, which will be replaced with a tax on the bookmakers' profits known as Gross Profits Tax.

The UK's major betting firms which have moved their operations offshore to centres such as Gibraltar are now expected to return to the UK but it may not be as simple as that. Ladbrokes has indicated that it may not relinquish its base in Gibraltar just yet. The firm, which employs over 200 in Gibraltar alone, responded to the news by saying it was considering the options 'for maintaining the maximum possible presence in Gibraltar', even though a delighted Chris Bell, the worldwide chief executive of Ladbrokes, did say that the move 'has to rank alongside Red Rum's three Grand National wins and Frankie Dettori's magnificent seven as one of the best ever days for punters.'

The first bookmaker to relocate offshore to Gibraltar two years ago has said it will not be enticed back to the UK on such a 'hollow victory.' Victor Chandler argued: 'The betting duty cut ... will not stop UK punters betting offshore. The proposed 15 per cent tax on gross profits is simply another stealth tax. Regrettably, this looks like a hollow victory for punters, as they will continue to pay, only this time they won't realise it. I believe the only way to turn the UK into the world centre for gambling is to have no tax, aside from corporation tax.'

Another Gibraltar-based bookmaker who doesn't think the UK government has done enough to lure it back to the UK is Simon Bold. The company has confirmed that its operations on the Rock will remain unchanged and is urging the Gibraltar government to consider granting more licences to other companies in the gaming industry.

Perhaps the biggest response to the Budget is from Ireland, where bookmakers have warned the government that they may have to move their operations to the UK unless Ireland follows suit. In an attempt to compete with operations established in tax-free or low-tax centres such as Gibraltar, Irish online bookies have been absorbing the tax themselves.

Stuart Kenny from Paddy Power said Chancellor Brown's decision 'will have a positive effect on turnover and activity and now makes the UK a very attractive base for betting operations.' And his company will be among those bookies waiting to move their online operations to the UK. He explained that the new UK tax translated to a tax of just 1.8 per cent compared with Ireland's current 5 per cent betting tax, saying 'unless something is done, we will have no choice but to transfer all our business to the UK.'

Already Irish bookmakers have wasted no time in lobbying the Department of Finance. Brian O'Farrell from the Irish Independent Betting Officers Association (IIBOA) said he has requested a meeting with Finance Minister Charlie McCreevy. O'Farrell said: 'The Minister has always listened to us and we are expecting a reasonably good response from him.' The IIBOA says it is not about to get greedy though and is hoping for a reduction in betting tax to about 2 per cent in shops and 1 per cent for online transactions rather than a complete abolition of the tax.

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