Gordon Brown will announce plans in next month’s Budget to encourage the beleaguered online gambling industry to be regulated and licensed by the UK Government.
The Treasury has long had its eye on the potential tax revenues that are generated by the likes of PartyPoker, 888, Ladbrokes and other gaming companies that are based in Gibraltar and other offshore centres.
From September the companies will be allowed for the first time to relocate to the UK and obtain a licence under the Gambling Act. However, all companies have said they would never relocate to the UK if they had to pay a tax on gross wins as high street casinos do. Bricks-and-mortor casinos pay tax of up to 40pc depending on their size.
In a surprise move, the Chancellor will use the Budget to announce that in return for a small amount of tax – possibly as low as 2pc or 3pc – companies can obtain a UK licence and still remain based overseas. The new tax will be called Remote Gaming Duty. This compromise would allow gambling companies to avoid British VAT.
Crucially, the exact rate has yet to be decided but John O’Reilly, the head of online gambing at Ladbrokes said he was pleased with the deal: „It’s quite a breakthrough.“
He confirmed that if the rate was less than 3pc Ladbrokes would almost certainly sign up for a UK licence. „We want to be regulated by the UK Government.“ The company’s online gaming division generates £100m, so the move would generate between GBP 2m and GBP 3m for the Treasury.
The Treasury’s willingness to embrace online gambling is in sharp contrast to the authorities in the United States, which last year launched a drastic crackdown on the industry.
The success of the plan depends on the exact level of Remote Gaming Duty, but Andrew McIver the chief executive of Sportingbet, currently based in Antigua, said he intended to apply for a UK licence if the duty was „a nominal amount“.
Clive Hawkswood, the chief executive of the Remote-Gambling Authority, the online gaming trade body, justified the low rate of tax because „these companies have grown up in zero tax jurisdictions. They operate on very thin profit margins. A 15pc gambling duty would wipe out half the industry overnight.“
The breakthrough came as Ladbrokes confirmed its intention to bid to run the supercasino in Manchester.
Chris Bell, the chief executive, said he was confident that the company could beat the giant US and South African operators.
„This is not a home run for our good friends across the Atlantic. Ladbrokes is a great British company and we have a very good chance,“ he said.
The company unveiled full-year results that showed good online betting, but a fall in UK profits. Ladbrokes has been investing in its high street estate, ahead of the shops being able to open for longer hours later this year.
Pre-tax profits increased by GBP 3m to GBP 243m on revenue up 7pc to GBP 966m. A final dividend of 8.6p will be paid June 1.
The shares fell 9½ to 432p.