Gibraltar is located on the southern end of the Iberian Peninsula, with an area of only 2.6 square miles. It is home to approximately 30,000 residents, of which 4,000 are thought to be employed by online gambling operators, and around 300 Barbary Apes (presently unemployed). New UK legislation is expected to be put in place within 6 months, could mean big changes for these companies and the economy as a whole.
What changes are to be made in UK gambling law?
Well, the UK Gambling Bill was introduced in May via the Queen’s Speech and is expected to be law before March 2014. This bill aims to make changes to the treatment of overseas gambling companies who are providing services to UK customers. This combines with the upcoming Finance bill (expected by December 2014) and gives rise to the Place of Consumption (PoC) regime.
At present gaming companies who hold overseas licenses are able to provide services to the UK at a low tax rate, but the new regime implies that these companies will be taxed a rate of 15% on revenue from UK customers. This could mean to a huge yearly cut in profits for many major online gambling providers. This of course could spell disaster for smaller companies who rely heavily on UK customers.
Chief Executive of the Remote Gambling Association, Clive Hawkswood, was quoted in legalweek.com, saying “Gibraltar, Alderney and the Isle of Man have the highest concentration of UK customers in gaming terms and that 60% of Gibraltar operators’ market is UK-based.”
The knock on affect from the PoC could see a large hole being carved out of the Gibraltarian industry. The economy of Gibraltar is currently bolstered by online gaming, with around 1 fifth of its GDP coming from this growing industry.
The members of the Gibraltar Betting and Gaming Association (GBCA) have paid more than £500,000 to fund a legal challenge against the new laws, according to Graham Hann, from the International Law firm Taylor Wessing.
Casino operators who are based on The Rock, such as 32Red plc, have been busy expanding into new markets who have recently regulated their markets, such as Italy and Spain, to try and offset the increase in tax. But these markets are also challenging, with governments demanding a high share of gross gaming revenues in return for a green light to operate. Many online casino companies, such as Digimedia which run well known sites such as The Gaming Club and Jackpotcity have already moved to Malta- an alternative jurisdiction that is a member of the EU. Time will tell whether this trickle away from Gibraltar will become a stampede.
We know that a Gibraltar licence holds a considerable cachet among UK players- over the years it has developed a strong “player-friendly” reputation and has a good record in policing casinos operating within it’s jurisdiction to ensure that companies operate ethically and fairly. The question is, will this be enough to persuade operators to stay when they no longer enjoy the tax benefits of operating from an overseas location
