The online gambling industry should further press the UK government to soften a looming licensing and taxation regime that one executive predicts would be ruinous for some companies.
The UK’s suggested 15 percent tax on gross gaming revenue should be resisted before it takes effect on December 2014, executives said.
"There will be people who will go from profitable to unprofitable overnight," said Mark Davies, managing director of Camberton Strategic Communications and a former Betfair executive. "The government doesn’t want a fight over it, and the industry wants a concession. That tells you there’s a deal to be done."
Davies was speaking on a panel about the planned UK tax at point of consumption at the EGR Subscribers Forum at Wembley Stadium in London on Thursday.
Davies said smaller companies should seek to have the tax bite halved, or have it kick in only after a certain level of income is reached.
"Smaller operators would be nuts not to see what they could do," he said. "Millions of pounds are at stake."
But Clive Hawkswood, chief executive of the Remote Gambling Association, said the situation could be worse and would be had the government not been consulting with the industry on the issue for 18 months.
"The government has bigger sticks than we do, and there’s bad things that they’re not putting on the table," he told the audience of executives, suppliers and regulators. "I won’t mention them in a public forum."
Later, he said the tax proposal could be 20 percent of revenue, or the government could be pressing internet gambling companies to pay sports betting rights fees to rights holders and governing bodies.
Britain’s coalition government is seeking to force online gambling companies to become licensed for their online activities in the UK, as those companies have moved offshore in recent years to reduce their tax burden. Online companies that solicit UK business argue that customers will drift to unlicensed operators if the tax rate is set too high.
"There are people out there who see this as a huge opportunity to attack the UK market," said Ed Ware, chief executive of Gibraltar-based 32Red. "If your skills are getting through advertising restrictions, that’s what you’ll do."
Genting, which is the UK’s biggest casino operator, has a different view. UK casinos are liable for tax of up to 50 percent and a rival casino operator, Rank Group, also called for a single tax rate for all forms of UK gambling.
Peter Nolan, managing director of Genting Alderney, noted that industry officials seemed to have no plans to use what could be their most effective bargaining chip -– a promise to bring offshore workers back to the UK.
"If we’re going to keep those jobs offshore, we shouldn’t be surprised we’re faced with a government which is pretty unfriendly," he said.
Hawkswood of the Remote Gambling Association said the industry might see some results with a friendly, rather than fighting, approach.
"Governments do deals all the time," he said. "Show them how to do it in a way that doesn’t undermine their objectives."
Rank yesterday called for a single tax rate for all kinds of gambling. Though it operates land-based casinos and bingo halls in the UK, its Rank Interactive unit is run from Alderney.
"We remain convinced that a fair tax regime which supports UK jobs and stimulates local economies can only be achieved by introducing a single rate of tax for all products governed by the Gambling Act," chairman Ian Burke said on Thursday as it announced its 18-week sales.
Rank said it expected that a 20 percent tax rate on machine games duty, an adjusted casino gaming duty rate and the proposed 15 percent online gambling rate would have "no material impact" on operating profit.
Comparable revenue grew 5 percent in the 18 weeks ended May 6 compared with the same period a year ago, Rank said. Rank Interactive gained 17 percent, Grosvenor Casinos gained 6 percent and Mecca Bingo revenue was unchanged, the company said.
Top Rank Espana revenues dropped 2 percent on the same basis.
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Stephen is a partner at DLA Piper, an international law firm. He is based in the London office. By background, Stephen is a commercial, regulatory and technology lawyer and concentrates on advising clients on all operational and regulatory aspects of their businesses, with a particular expertise in the infrastructure that underpins the on-line gambling industry. He acts for operators and suppliers alike by drafting, negotiating and advising on matters such as intellectual property, software licensing and development, white-label supply agreements and affiliate arrangements and advises on the regulatory aspects of corporate transactions and the corresponding issues affecting investors, lenders and intermediaries. He regularly speaks at the sector’s major conferences, regularly writes for its major publications and is noted in Chambers 2011 as an expert on legal matters relating to the online gambling industry. The team he is part of was voted the eGaming Review Onshore Lawyer of the Year 2010 and he manages the "Gambling UK" LinkedIn Group.
