Monday September 16,2013 : RGA COMMISSIONS KPMG STUDY ON PROPOSED POC TAX
Not viable if higher than 10 percent, concludes study
The Remote Gambling Association (RGA) has revealed the conclusions of a KPMG study it commissioned on the UK Government's proposed place of consumption (POC) tax of 15 percent on gross profit.
The study concluded that HM Treasury's POC tax regime for online gambling "is likely to fail to achieve its aims unless the rate of gross profits tax is no higher than 10 percent and it makes allowances for companies to offset costs associated with bonuses and incentives."
The RGA tasked KPMG to test the economic impact of the proposed point of consumption tax on the British online gambling market under the following aspects:
- analyse the economic merits of these proposals
- consider the possible impacts of the imposition of a 15 per cent tax; and
- recommend how an optimum percentage figure might be identified.
According to the KPMG report:
The dangers of introducing the proposed rate of 15 per cent immediately are:
- Firms are unable to recover their costs and either go out of business or are forced to operate in the grey market; and / or
- A large number of UK customers switch to buying gambling products from offshore duty avoiding providers because they are able to offer lower priced, more attractive, products.
- If either of these come to pass, then it may be difficult to reverse these consequences with a subsequent reduction in the tax rate.
The Government’s proposals to maintain the current position where some player bonuses in bingo, poker and casino gaming are not tax deductible will further damage the ability of licensed and taxpaying operators, who will already be required to meet a significantly higher tax burden, to compete with those overseas operators who will continue to target the UK market without holding the requisite licences or paying tax, the report found.
Clive Hawkswood, Chief Executive of the RGA said today:
“It is vitally important that the Government does not repeat past mistakes. It needs instead to set rates of remote gaming and betting taxation that give operators a realistic chance of being competitive in what is an inherently international market.
"This is a challenging time for the industry and we will continue to engage with Treasury to ensure the impact of any tax changes is fully understood by the Government. The online gambling industry is a UK success story and already contributes significantly to UK Plc in terms of jobs, marketing spend and corporate taxes. We do not want to see the Government’s plans put these companies and their investments in jeopardy.