Online Poker & Gambling Firms Disappointed in Remote Gaming Duty Tax Announced by UK

Britain's Chancellor of the Exchequer, Gordon Brown, disappointed online poker and online gambling firms who had hoped Brown would announce a lower 'Remote Gaming Duty' tax to entice them to become licensed in the UK, while casinos grumbled about new higher taxes imposed on their establishments.

Remote Duty Tax for Online Gaming Firms

By announcing the new 'Remote Gaming Duty' tax for online gaming companies at 15% yesterday, Brown dashed any hopes that the government could successfully encourage online gaming firms to apply to be licensed and taxed in the UK while remaining physically located in their current tax havens, much less to entice them to relocate their businesses to the UK.

Many online gaming companies had previously stated that they would not seek a UK license if the new remote gaming tax were higher than 2 or 3 percent.

Many also said that there was only a remote chance they'd be encouraged to leave their offshore tax havens and become regulated by the UK (click here to read related PokerPages Article).

The 15 percent tax rate is the same rate as the gross profits tax paid by UK-based bookmakers.

John Coates, chairman of the Remote Gaming Association (RGA), said, "Under this regime, with the additional VAT and corporation tax for most companies, it would be almost impossible for a UK-based operator to compete with offshore businesses, especially those located in other EU jurisdictions."

Coates said that the 15 percent rate means the UK government has "effectively turned its back on the industry."

Rate Changes for Physical Casinos

The government has also announced two significant changes to Gaming Duty bands and rates for physical casinos, as a phase-in of the 2005 Gaming Act which comes into effect September 2007.

From April 1, the 2.5% starting rate of Gaming Duty on house winnings will be removed, which increases the effective rate of duty on the majority of small casinos from 12.5 to 15 percent.

For larger casinos, a new top rate of 50% tax was introduced, up from 40 percent. Brown said this new higher top tax rate will ensure that "this vibrant and expanding sector continues to make a fair contribution to tax receipts."

The new top tax rate will apply to casinos like the high rolling Mayfair casinos whose gross yield from gaming, reported the Guardian, exceeds GBP 10 million (about USD$19.7 million, or 14.7 million Euros) per accounting period.

Rank Group said it was "dismayed" at the changes, which it is estimated will cost the group GBP 8 million a year (about USD$15.7 million, or 11.8 million Euros).

The new taxes on casinos also means that firms competing to win the right to operate any of Britain's planned new wave of 17 Las Vegas style casinos being awarded under the new Gaming Act will need to redo their budgets and reconsider the viability of such projects.

"It may well discourage operators from bidding (to run the new casinos)" Deloitte Leisure partner Karen Potts relayed to Reuters.

"Some have probably been working on an effective tax rate of 20 to 25 percent of duty and I would think this change could well put that up as much as 25 percent" Potts added.

The UK Treasury predicts the new rates will generate an additional GBP 35 million to their coffers (about USD$68.9 million, or 51.6 million Euros) over the next year. For the fiscal year through March 31 2005, the Treasury received a total gaming duty of GBP 157 million (about USD$309 million, or 231.4 million Euros).

Read Related Articles: