ARGO Releases Two Reports on Key Issues Facing Industry

29 March 2005

For the first seven months of its existence the Association of Remote Gambling Operators (ARGO) remained on the sidelines of the interactive gambling argument. Within the last week, ARGO has taken an aggressive stand against monopolies in the EU, and the UK government's tax structure in the pending Gambling Bill.

ARGO released the findings of a study last week by European Economics that looked into the validity of interactive gambling operations moving onshore if the UK Gambling Bill moves forward.

On Tuesday ARGO followed up the tax issue study with a report that looked into the cross border remote gambling industry within the European Union.

Both reports mark the coming out party for ARGO, which was formed in August 2004, and leave no doubt into the group's stance on key issues facing the industry.

The UK Report

In the UK report ARGO points out that although the UK government is hopeful that offshore gambling operators will come back to the mainland once the Gambling Bill is passed, that might not happen.

The report claims that repeated efforts by Ministers and other MPs have stressed the benefits of Britain becoming the prime location for remote gambling operations (job growth, improved regulation, increased revenue, consumer protection, ect.), ARGO is convinced that such an exodus from offshore jurisdictions to Britain will not be realized.

"The tax liabilities British-based operators would face are likely to be too high," the report says.

A number of other jurisdictions - including Malta, the Isle of Man, Alderney and Gibraltar - are tempting remote gambling operators with favorable tax and regulatory regimes.

"The opportunity to regulate remote gambling operators might be lost if regulations and taxes are set with no regard to the commercial realities facing operators," the report warns. "Of most concern is the possibility that British regulatory oversight of the industry will fall as most operators choose to seek licenses elsewhere. It would be unfortunate if the Gambling Bill were to deter remote gambling operators from seeking British licenses."

John Spicer, author of the report said that despite the wishes of Ministers and others in government positions, there is little incentive in the Gambling Bill for companies to move their remote gambling operations to Britain.

Clive Hawkswood, general secretary of ARGO, called on the government to take the proper steps.

"To make Britain a world leader in this field the Government needs to create a regulatory and tax environment which will allow this to happen," he said.

The report concludes that the Government needs to adopt regulations that are effective, proportionate and targeted; and recognize that taxes influence the location decision of operators and therefore the effectiveness of any regulations.

"From the modeling we have done it is clear that there is little financial incentive for remote gambling operators to locate the whole of their business to the UK," Spicer said. "There is intense international competition between remote gambling operators based in any number of other viable low-tax jurisdictions. Against that background the Government should be careful not to price the UK out of the market."

ARGO Chairman, Ian Spearing (William Hill), said the report is an "important piece of work that we hope will set the scene for further discussions with HM Treasury about the future tax regime."

Europe Economics is a London-based independent economics consultancy that has a wide experience of the gambling industry.

Click here to read the full text of the ARGO UK report.

The EU Report

On the heels of releasing the UK report, ARGO published a report on Tuesday that looked into the current state of remote gambling operations within the European Union.

In "Fair, Honest and Safe: cross border remote gambling within the European Union," ARGO took an in-depth look at a growing number of EU Member States that are currently imposing trade barriers to prevent remote gambling operators in other Member States, like the UK, from accessing their markets.

The report shows that in many cases the restrictions are being applied to protect domestic gambling monopolies and/or tax revenues and not, as claimed, for reasons of public interest.

The report argues that reputable operators, licensed within the EU, offer fair, honest and safe products for consumers. The report claims that, on the basis of EU Law, Member States are obliged to apply consistent policies relating to gambling services. Any restriction on the freedom to provide gambling services must therefore be strictly proportionate and non-discriminatory.

Spicer implored EU Member States that currently ban foreign companies from entering its market to reconsider their stance.

"Removing unfair barriers is crucial to the long-term success of the industry in Europe," he said. "It is perverse that socially responsible remote gambling operators who are properly licensed in one EU state and legally entitled to do so according to the treaty cannot offer their products freely within the internal market."

Hawkswood said battling unfair competition throughout the EU remains one of ARGO's top priorities and the group is committed to challenging the issue in the long-term.

"Those opposed to the free movement of remote gambling services in the EU hold deeply entrenched views," he said. "However, we are in this for the long haul and will continue to argue strongly that our position is supported by EU Law and recent European Court of Justice cases such as Gambelli and Lindman."

Hawkswood said ARGO is encouraged by the European Commission's decision in 2004 to launch infringement proceedings against several EU Member States in relation to their domestic restrictions on sectors of the gambling market.

ARGO publicly called on the Barroso Commission, and in particular the Commissioner for Internal Market and Services, Charlie McCreevy, to open infringement proceedings against other Member States in 2005.

"Member States and EU parliamentarians must be aware that articles 43 (freedom of establishment) and 49 (freedom to provide services) of the EC Treaty apply to gambling and that Member States are obliged to apply consistent policies to gambling services," Hawkswood said. "Gambling is an EU competence and any attempt to withdraw gambling from the scope of the proposed Directive would contradict the rules of the Treaty and the Court of Justice case law."

Click here to read the full text of the ARGO EU report.

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