The Implications of the New UK Gambling Tax

Since the UK passed the Gambling Act in 2005 the country has developed one of the world’s most active and vibrant online gambling markets. Online gamblers in the UK enjoy a level of consumer protections not available to most players outside the UK. Since the passage of the act all operators based in the UK have been required to obtain a license and pay a 15% tax on bets made in the UK. The high taxes triggered the exit of many online gaming companies who then set up shop in jurisdictions with more favorable tax policies. Many moved to Gibraltar, the Isle of Man, Malta and other licensing jurisdictions.

Lower taxes gave offshore operators a competitive, and unfair, advantage over operators located and licensed in the UK. A bill in Parliament will close the loophole for offshore operators. Offshore operators will be subject to the same tax requirements as domestic gaming operators. Most observers believe the bill will be passed early in 2013. Many large operations like PokerStars and PartyPoker will be changing their domain names to ‘co.uk’ domains. That way only wagers made in the UK will be subject to taxation. The new system will go live in 2014 and hopefully there will be minimal disruptions for players in the UK.

Online gambling operators will have to carry the burden of increased licensing costs in the UK as well as a 15% gambling duty. Even worse operators will be required to pay a corporation tax of 23%. Most industry experts believe operators will pass these increased costs along to players and could lead to situations similar to those in French, Italian and Spanish markets where poker operators have increased the rake they charge. Some believe operators will reduce the size of their player bonuses and may charge more for games. Many online bingo operators will be affected and it will be interesting to see how they respond.

Some industry observers believe that bonuses may be reduced by as much as 10%. There is a little bit of good news for players in the United Kingdom. They will still be able to enjoy a tax exemption on gambling winnings. Recently Sweden started demanding back taxes from the country’s online poker players who had played at offshore poker rooms located outside the European Economic Area. In face the Swedish government is sending a letter to online poker players that reads “[We have] obtained information that you have played poker in one or more Internet sites based outside the European Economic Area (EEA) for the period 2008-2011. Please submit bank statements or similar documents from any internet site where you had the bankroll for the period 2008-2011.” Hopefully the UK can avoid a similar situation!

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