If you take a look at the small print at the bottom of most online bingo sites, you would probably find that it says something along the lines of “registered in Gibraltar, licensed by the Government of Gibraltar and regulated by the Gibraltar Gambling Commissioner”. This is because these companies have been able to use Gibraltar as a tax haven, allowing them to avoid having to pay the UK betting tax, saving them literally millions of pounds every year.
Gibraltar issued their first online gaming license in 1998 but their original Gaming Act of 1958 was updated in 2005 to reflect the changing ways in which people gambled. This was largely due to the growth of the internet, which resulted in more and more people playing online as opposed to using land based bingo halls and bookies. The Gibraltar Regulatory Authority is now considered to be one of the most unbiased and ethical bodies of its kind in the world, and operators have to work hard before obtaining a bingo licence.
Gibraltar may be the biggest tax haven (accounting for some 65% of all online transactions) but they are certainly not the only one. Others include Alderney, the Isle of Man and Malta to name but a few. All of these countries offer significant tax benetits for such companies, regardless of whether it is bingo. casino, poker or any of the other forms of gambling you can enjoy online or via your mobile devices these day.
In a few months time all of this is going to change though, with the introduction of the Point Of Consumption Tax, that was announced during the recent budget. This means that from December 2014, operators will have to pay 15% on the gross profits they make from bets placed based on where customers are physically located rather than where the online operator is registered. It is expected that this change will generate over £300 million a year for the UK economy.
As you can you can imagine though, this news has not gone down well with bingo operators, as all of this increased revenue will be coming straight from their profits. Ladbrokes, Bwin.party, William Hill and Betfair all have online operations based in Gibraltar, where taxes are levied at 1% and capped at £425,000, so the new 15% Point Of Consumption tax is going to going to cost them millions as they will end up being taxed at the same level as domestic internet betting companies.
William Hill, which has the largest share of the countries remote gambling market, have already stated that they could challenge the changes to the tax laws on the grounds that they breach European Union competition law. It will be interesting to see if they follow through with this and if more of the big operators follow their lead. Research carried out last year by the Global Betting and Gaming Consultancy last year suggested that several of the big operators may even end up merging to lower their overheads and claw back some of their lost profits.
As a player though, the looming Point Of Consumption tax should be to be a good thing. We have already seen bingo sites spending a lot more on marketing in the hope of increasing their market share before the full impact of the tax hits them. If this trend continues, this larger marketing budget should trickle though the system and result higher bonuses and improved promotions, which we are sure you will agree is never a bad thing!