Online Gambling Tax to be Legally Contested Before EU

July 16, 2015 •

UK-Government-Considers-Cutting-Online-Gambling-TaxAt the end of 2014, the United Kingdom decided it would change its tax system for all online casinos and card rooms operations in their jurisdiction. This would be a new consumption tax and would require licensing of operations that offered any kind of online gambling services in the United Kingdom. This created a huge uproar from online gambling outfits based in Gibraltar who capitalized on low to no tax arrangements. It’s these enterprises are bringing the issue to the European Union’s Courts of Justice (CJEU) which will finally determine if these new tax laws have contravened any European Union laws, and if they decide against it the Court of Justice of the European Union could make implemeting this new tax near impossible for the U.K. government.

With the battle over the controversial online gambling tax now referred to Europe, gambling companies had outright challenged the U.K. government over the new point of taxing all online bets. The latest developments came on Tuesday when the High Court ruled that the Luxembourg-based Court of Justice of the European Union should be the one to decide on the conflict between HM Revenue & Customs (HMRC) and the Gibraltar Betting and Gaming Association (GBCA), which represents a host of online gambling companies.

The so-called point of consumption (PoC) tax has already been in effect 8 months, coming into force last December. It imposed a 15% duty on all online gambling profits generated in the U.K. This affected many online wagering companies, including Ladbrokes and William Hill, who has set up their digital betting businesses in low or nil-tax environments. The government envisaged this new levy to close this tax loophole which many had been benefiting from.

But, the GBCA, who is acting on behalf of betting firms based in the British Overseas Territory, has already challenged the tax through the British courts. They are hoping that this recent referral to the CJEU will make it possible that the PoC tax “will be found unlawful”, says Numis analyst Ivor Jones, which would be a great loss to HMRC.

“The CJEU will also be asked to rule on whether the UK Government’s aims in creating the regime are legitimate,” Mr Jones told media this week. “The Government may be vulnerable here since it referred to diminishing the competitive advantage of overseas operators and increasing UK tax revenue, which may be held to be unacceptable aims if implementation also reduces EU competition.”
He added: “In theory, the Government could be obliged to refund all the duty it has collected under this regime. Given the political potency of debates about Europe, the Government may seek to save face and resolve the matter before it gets to court.”

A spokesperson for HMRC replied to media questioning: “The judgment has not found against any aspects of the UK gambling tax regime, and we remain confident that the place of consumption reform for the gambling tax regime is lawful. We are considering the judgment in full before deciding how to respond.”

The results will surely be highly anticipated, and hotly contested by one of either side. As it’s a decision that will run revenues in the billions.