Online Betting Exchanges Condemn UK Tax Review

by Jason Gorringe, Tax-News.com, London

26 March 2004

Online betting exchanges have expressed concern with regard to the tax review of their sector announced by UK Chancellor, Gordon Brown in his recent budget report.

Although a relatively new addition to Britain’s gambling industry, the popularity of internet betting exchanges has increased dramatically, with more than 250,000 people using them, according to some estimates. The exchanges work by allowing punters to place bets with each other, rather than with a bookmaker, with the exchange firm effectively acting as a broker.

However, unlike bets placed with conventional bookmakers, users of exchanges pay tax on commissions, rather than on winnings, allowing them for the most part to pay less tax.

Conventional bookmakers have complained that this gives the exchanges an unfair competitive advantage, and have welcomed the review.

Speaking to the New Media Zero news service this week on behalf of internet betting exchange, Betdaq, Rob Hartnett announced that:

"We're disappointed with the announcement. Nevertheless, we will present our arguments again that ours is merely a more efficient means of bookmaking and to penalise such innovation to protect the commercial interests of an existing sector of the industry would be iniquitous."

Industry observers, meanwhile, have warned that if the conclusions reached by the tax review are unfavourable to the exchanges, the UK government risks losing a great deal of existing revenue as the sector shifts offshore.

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