One year on, the warning of perilous consequences for the UK, foretold by William Hill CEO, Ralph
Topping, in a statement in 2008, appears to have been heeded too little, too late
by the UK government; with reports that Britain’s three largest bookmakers
could jump ship simultaneously when William Hill discloses its intentions for
the coming year on August 4. Having ruled out suggestions that it might join its
peers in relocating offshore in 2008, one year later – after the credit
crunch; an attempt to increase taxation in the UK budget; and little progress
on regulatory reform - William Hill appears to be poised to trigger a mass exodus.
In an interview in July 2008 following the release of William Hill’s
interim results, Topping underscored the urgent need for the UK to lower taxes
and reform regulation. In view of the rise in Internet betting, Topping suggested that the
UK needed to level the playing field with offshore,
and encourage new companies to the UK.
“This business needs some room to grow. What I am saying to the government
is, please think things through from all angles,” he urged.
He dismissed the suggestion that William Hill might consider following the
example of some of its peers and relocating offshore, observing that:
“That would be extremely costly ...
Besides, we like being a UK business.”
One year on William Hill has disclosed to the Financial Times that competition with rivals
enjoying benevolent tax regimes meant that UK bookmakers did not have the ‘luxury
of being parochial about the future’, and that relocation remained a ‘live
issue’ for bookmakers because of the lower tax regimes enjoyed by overseas
rivals.
William Hill is expected to announce that it will shift its online sports and
phone betting operations to jurisdictions where it already has a presence, for the most part
to Gibraltar, where it has already bolstered its operations with an additional
90 staff. It is anticipated that its divisions in Malta, Israel, Bulgaria and
the Philippines will also be substantially increased.
In a recent statement, Topping denounced the UK government’s inaction
as “utterly dopey”, underscoring that relocation to Gibraltar would
primarily be in an effort to relieve itself of UK regulation, and capitalize
on Gibraltar’s streamlined regulatory system -overseen by the Gambling
Division of Gibraltar’s Regulatory Authority, which was recently recognised
as 'Regulator of the Year' by the World Online Gambling Law Report. Gibraltar’s
July budget further increased its attractiveness to potential investors, reducing
its corporation tax to 22%, with several additional benefits - including a 10%
tax rate for start-ups, in anticipation of the launch of its 10% corporate income
tax rate on January 1, 2011.
William Hill has been ‘dual running’ its online sport betting servers
in both the UK and Gibraltar for several weeks, which will allow a seamless
transition if William Hill were to decide to cut its UK operations from August
4.
William Hill’s largest UK-based rival Ladbrokes, which currently only
generates 10% of its revenue offshore, has indicated that it is ‘keen
to remain a British company’, but if William Hill were to move offshore
it would have to respond. In a statement on July 3 it announced that it would
significantly reduce employment in UK-based call centres and move its services
to more favourable locations.
Ladbrokes statement noted: “Telephone betting is a very competitive market,
and one that is becoming increasingly difficult for UK-based operators. We pay
tax on our gross profits at 15% and we also pay 10% on our profits from UK horseracing,
in addition to VAT and corporation tax.”
“Offshore operators pay no or very low taxes and no horseracing levy.
These job cuts reflect the increasing level of competition from offshore operators,
but will not diminish the service we offer.”
During 2008 Ladbrokes paid GBP100.4m in
Gross Profits Tax, GBP68.5m in VAT, GBP49.9m in Corporate Income Tax as well
as paying GBP40.4m through the Horserace and Betting Levy, which helps subsidise
the industry. Ladbrokes alone accounted for 35% of the total Horserace and Betting
Levy for 2007/2008.
Ladbrokes launched a campaign against the scope of the Horserace and Betting
Levy in March. It stated that, whilst it agreed it with the principle of the
levy, it was not paid by all operators benefiting from UK horseracing, as operators
in other countries were not required to pay the levy, leaving the big three
footing the majority of the bill.
Gala Coral, suffering major financial difficulties, albeit still one of the
UK industry’s largest players, has publicly admonished the government’s
tax policy, particularly its flash decision to increase taxes on bingo halls
to 22% from 15%, which are struggling due to the rise of internet
gambling.
The UK government has showed little endeavour in its plight to review remote
gambling rules and level the playing field. It may now be too late.
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