Britain’s Brown Bounces Betting Businesses

A further chapter in Britain’s economic suicide comes from Tax Notes International today (subscription only):

In a move apparently aimed at lowering their tax bills, major U.K. sports bookmakers William Hill and Ladbrokes plan to relocate their sports betting operations to Gibraltar, according to media reports.

The move by William Hill was announced on August 4 and was subsequently followed by Ladbrokes’ announcement on August 6. The moves are projected to cost the U.K. Treasury millions of pounds in tax revenue, according to an August 6 report on www.guardian.co.uk.

The departure of these sports betting firms, particularly if other sports bookmakers follow, could put the U.K.’s entire online gambling market (the largest legal betting market in the world) beyond the reach of either the Gambling Commission or the Treasury, according to media reports.

Ladbrokes CEO Christopher Bell cited “intense competitive pressure” as the main spur pushing his company offshore. “Our award winning sportsbook Ladbrokes.com is the biggest in the U.K. market but faces aggressive competition from offshore operators who hold a very significant cost advantage by operating from low tax jurisdictions. Operating from the U.K. has become unsustainable and we will relocate by the year end,” he was quoted as saying in an August 6 statement on the Ladbrokes Web site.”

The 15 percent tax on online gambling (the industry had lobbied for a 2 percent or 3 percent tax), one of Gordon Brown’s last acts as chancellor of the Exchequer, has been generally seen as an embarrassment for London, which had sought to position the U.K. regulatory approach as world leading. Instead of applying for licenses with the Gambling Commission as the laws’ drafters had hoped, members of the online gambling industry have boycotted the U.K. and headed offshore.

“The U.K. has effectively turned its back on the industry. It will now be almost impossible for a U.K.-based operator to compete with offshore business,” John Coates, chair of the Remote Gambling Association, said in a March 2007 statement. Sports betting became the last gambling subindustry to remain onshore.

Currently, the total tax faced by U.K.-based sports bookmakers includes the 15 percent profits tax, a 15 percent VAT, corporate tax, and a special 10 percent tax for horse racing betting profits. Tax rates in offshore locations such as Gibraltar, Malta, or the Isle of Man are only about 1 percent to 2 percent, according to the statement on the Ladbrokes Web site, and there is no special horse racing profits tax.”