TaxPersonal TaxE-betting taxes in Budget spotlight

E-betting taxes in Budget spotlight

Chancellor Gordon Brown is considering a crackdown on tax-avoiding e-gambling websites in his Budget next month, a move that could have far-reaching implications for companies conducting business over the internet.

Brown is thought to be considering granting tax authorities the power to tax businesses and individuals within the reach of the UK Government regardless of where they theoretically do business, currently considered to be the server through which the website is routed.

In addition, the 2001 Budget could also include a reform of the betting duty if the country’s largest bookmakers agree to close their offshore operations and relocate to the UK.

The Financial Times reported today that both Customs and the Revenue were studying a proposal to scrap betting duty and place it with a tax on profits. This would assist traditional bookmakers cope with the rise of internet gambling which has forced them establish offshore operations.

Warwick Bartlett, chairman of the British Betting Office Authority said currently online betting accounted for as much as 10% of total betting turnover (estimated at Pounds 7bn) with large clients preferring using internet, WAP or television services to place their bets.

He told AccountancyAge.com: ‘The proposal would be most welcomed by the betting industry.’ But he added: ‘Tax rates in the UK would have to be comparable with those in the tax regions where the bookmakers are currently based.’

Currently bookmakers charge punters 6.75% of their winnings in betting duties, with 2.25% going to the racing industry. Last year’s Budget did not offer any concessions to bookies’ betting duties, forcing them to move their operations overseas.

However the Treasury has stressed it would only consider scrapping betting duties if the bookmakers agreed to relocate all offshore operations, while another option being considered is switching liability for betting duty from bookies to winners.

The issue of betting duties came to light following a report last November from the Commons Public Accounts Committee, which warned: ‘Telephone and internet betting with bookmakers overseas is not illegal, but it represents a growing threat to the Revenue.

The MPs said the impact of internet gambling has been small so far, but warned: ‘In a rapidly changing environment new business could cut into revenues quickly.’

The committee called on Customs ‘to address the risk through planned reforms of betting duty and by working with the OECD on ways of modernising tax regimes and shifting tax to other parts of the business chain’.

The OECD has been at the forefront of tax reform of late, and has mounted a campaign to force tax havens to agree to transparency and reform of their tax systems

In its response to the report, the Treasury claimed Customs had recognised the long-term implications and have conducted a consultation exercise to identify the scope for reform of betting duty.

The department added: ‘The findings of this exercise will be used to inform Budget 2001 decisions.’

Links

Customs plans betting tax crackdown

Customs faces rising gambling losses

Bookees bet on moving offshore as Budget disappoints

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