Brown Makes It Official

Punters currently pay a 6.75 tax on each bet placed with a British betting establishment, a costly policy that has induced many bookmakers to head offshore where they can offer punters tax-free betting. Today's announced policy change, however, will replace betting duty with a 15 percent company tax on bookmakers' gross profits. The Treasury expects the policy to be in place by January 2002.

"These reforms will provide a better deal for punters and help UK bookmakers to compete internationally, while continuing to make their fair contribution to racing and to government revenues," commented Treasury Minister Stephen Timms. "The reforms are fair to punters, bookmakers, racing and the taxpayer, and will provide the UK with a betting duty system and a competitive environment for bookmakers fit for the 21st century."

A requirement for changing the betting duty is the repatriation of bookmakers who fled to friendlier locales, like Gibraltar, Malta and Alderney. The "Big Four" operators--William Hill, Stanley Leisure, Coral and Ladbrokes--are said to be ready to make the move.

Officials at Ladbrokes, for example, are enthusiastic about the shift in locales, saying that they intend to move the offshore betting business back to the U.K. as soon as "practicable" to get their "global center of operations" set up.

"The Chancellor has listened to what the betting industry has been saying," added Ladbrokes Worldwide CEO Chris Bell, "and we are now in a position to make the U.K. the global center of bookmaking. We expect betting customers in the U.K. and overseas to take advantage of these new betting conditions, as there will no longer be any need for customers to bet in tax-free havens."

But not all expatriate firms are happy. Victor Chandler told The Guardian that he will keep his Victor Chandler International business in Gibraltar and said that the U.K. government's move occurred only after "the stable door has been opened and the horse has bolted."

By remaining offshore VCI will be unable to advertise its site in the U.K., although Chandler remained confident about his company's ability to attract new customers. The new tax on profit, he said, "equates to a 3 percent betting duty, and that will be passed onto the punter. The punter will always suffer. People are still going to be able to find us, even if the government restricts our advertising."

Convincing the Treasury to change its taxation approach has been a rocky affair for the U.K. industry. Bookies had pled for some changes, especially after the Irish government made a small move in 1999 to drop tax for off-course betting shops from 10 percent to 5 percent, the U.K. Treasury finally took heed.

Late last year the Treasury conducted a consultative study, "Our Stake in the Future," that showed tax reformation could accomplish several objectives:

• to provide the right competitive environment for the UK betting industry to thrive, both domestically and internationally, and to take advantage of e-commerce opportunities;
• to give punters a better deal;
• to support racing through increased horseracing betting turnover; and
• to protect the long-term revenues from betting

Bookmakers were buoyed by the report. Its release gave them for the first time a glimmer of hope and redoubled their efforts to get a change implemented.

"The industry and in particular the Bookmakers Committee has worked extremely hard to explain to government the benefits that a change in tax policy would bring to the UK," commented Warwick Bartlett, chairman of the British Betting Offices Association.

"The onus is now upon bookmakers to deliver what we have said is possible. There is a lot of hard work to do, I for one will be going round the country explaining the advantages and opportunities that are available in the global gambling market for UK-based bookmakers," he added. "It is essential that U.K. bookmakers rise to the opportunity available in the world market and to recognize the excitement of challenge and change."

The challenges resulting from the betting duty change will be felt worldwide too. Offshore licensing jurisdictions were said to be bracing themselves for the budget announcement.

The Jersey government, however, which has been considering legislation to permit Internet gambling, is still interested in the subject. "The issue is not just about tax, " Jersey's Gambling Control Committee President Alan Breckon told the Jersey Evening Post. "Gambling businesses want to operate from somewhere with the right infrastructure and technology in place, which we do not have at the moment."

At the same time, the Alderney government has been looking closely at adding online casino legislation to their jurisdiction, a move that would certainly attract a number of new businesses to their shores. Such a move could also be the extra impetus for the British government to adopt similar legislation.

And despite the enthusiasm expressed by British officials, at least one U.S. policy maker wasn't so excited. "What Britain is doing is voluntary for the offshore operator," commented Rep. Bob Goodlatte, R-Virg., the sponsor of the U.S. federal Internet Gambling Prohibition Act. "It is their choice to return and subject themselves to regulation and taxes."

Goodlatte added, "I do not think this will be effective. The only way to curb illegal online gambling in the United States is to prohibit it and give law enforcement the tools they need to enforce our existing gambling laws."

The stock market delivered a mixed response to today's announcement. Several bookmakers saw their shares increase in value: Betinternet gained 2.38 percent in value, while Stanley Leisure rose 4.93 percent. At the same time, Ladbrokes' parent company Hilton Group plc fell 1.62 percent, while Sportingbet.com posted a 6 percent decrease.