The UK government said in its 2012 Budget that it intends to apply a 15 percent tax on the online gambling sector on a point of consumption basis as of December 2014, but this move will probably not achieve its aims.
A study conducted by KPMG recommends a 10% tax because a 15% tax could put companies out of business.
“Rather than undertake a comprehensive review of the tax regime, the Treasury has made minor changes to the current regime and has merely focused instead on extending its application to operators in other jurisdictions who transact with British residents,” KPMG said.
Clive Hawkswood, Chief Executive of the Remote Gambling Association (RGA) commented: “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.”
Should a tax increase come into effect, many online gambling firms will be forced to operate in the grey market. KPMG said that after a shift to the grey market it would be impossible to bring operators back by reducing the tax rate.
The online gambling sector in the UK and its protectorates is the success story of the online gambling industry. There is fear that an increase in tax would jeopardise the industry’s potential further success.
“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,” Clive Hawkswood, Chief Executive of the RGA said. “We argue strongly that any rate above 10 percent GPT is not sustainable in what is a very mature market where consumers already know what level of value and choice to expect.”