Written on 4/11/11 By Recentpoker.com staff writer Anthony Aperman :
Online gambling analyst James Hollins of Evolution Securities recently piqued the curiosity of industry observers with his post-2011 Budget comments on UK taxation and online gambling companies that have relocated offshore for business reasons.
Major UK firms like Ladbrokes, Stan James, Victor Chandler, Betfair and William Hill have in the past all set up online gambling divisions in offshore ‘white-listed' online gambling regulatory jurisdictions in order to remain competitive by escaping the punitive 15 percent tax rate in Britain.
There have been fears that the UK government may take a confrontational approach with these companies by preventing them from advertising and promoting in the United Kingdom through a ‘secondary licensing' strategy that would require offshore companies wishing to access the UK market to take out an additional (UK) licence.
Whilst that represents the ‘stick' route, there may be a more ‘carrot' oriented strategy afoot as well, in the form of amendments to the Controlled Foreign Companies (CFC ) rules. If these were to be ‘toned down' by the introduction of a special tax concession for offshore companies which repatriate their internet operations, it could have a positive effect, say some observers.
CFC reform might focus on a more territorial tax regime whereby instead of maintaining the existing practice of attributing foreign profits to UK tax unless they fall within specific exemptions, the UK tax would only be applied to GPT derived from activities in Britain, leaving offshore profits subject only to a six percent or perhaps even less concessionary rate.
Better some than nothing at all, say experts considering the parlous position of the British economy and the need for substantial tax revenues at present denied by the exodus of internet betting firms.
Six percent is still heavier than the tax levied in offshore jurisdictions like Gibraltar, the Isle of Man or Malta, for example, but allied to the threat of a possible exclusion from the Brit market, it could be a working compromise.