Offshore Bingo Sites Face More Government Scrutiny

It is no secret that most online bingo sites targeting the UK operate offshore because of heavy taxation in the UK. Recently the UK government has investigated the offshore bingo sites and is considering legislation that would require all bingo sites doing business in the UK to be licensed in the country. Currently offshore bingo sites pay no taxes in the UK and sites licensed in the UK are currently subject to a 15% tax on online bingo games. The government’s investigation has triggered speculation that things are about to change for offshore bingo sites.

The offshore bingo sites are not illegal by newly proposed licensing requirements could have a great impact on the internet bingo industry. Bingo sites outside of the UK have a huge advantage over their land based counterparts and bingo sites licensed in the UK. Currently land based bingo halls are required to pay a 15% tax, a VAT tax and high local licensing fees. This year several local governments doubled and in some cases even quadrupled license fees for bingo halls. A clear majority of smaller land based operators support equal taxation levels at 15%. There are several major companies that have land based and offshore operations.

As if the high taxation rates haven’t caused enough problems the Gambling Commission recently forced several bingo halls to switch off hundreds of slot machines. In some bingo halls slot games account for as much as 40% of all income. Some bingo halls held multiple licenses giving them the ability to operate more fruit machines but the government has closed down the loophole. News reports said that one major bingo operator was forced to shut down 700 slot machines and the action by the Gambling Commission could spell disaster for several bingo halls in the UK.

Offshore bingo sites only pay a 1% tax compared with the 15% they would have to pay in the UK. Offshore companies are able to profit from advertising freely in the UK while paying no taxes for the privilege. At some major bingo sites 50% of all profits go towards affiliate fees and another 15% is paid in software licensing fees. Bingo sites must also pay for advertising and marketing to attract new players. Since bingo sites licensed in the UK have to pay all of these fees on top of high taxes it is easy to see that offshore online bingo sites have a clear competitive advantage. Given the massive deficits the UK government is facing it is inevitable that the government will close the tax loopholes and require bingo sites to have a British-specific licence.

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