Gambling law reforms set for further delay

Out-Law News | 07 Mar 2014 | 9:44 am | 3 min. read

Reforms to gambling laws in Great Britain could be subject to further delay after the UK government announced that it would introduce an amendment to the Gambling (Licensing and Advertising) Bill.

Earlier this week the Department for Culture, Media and Sport announced that it would table an amendment to the Bill, which is currently passing through the UK parliament, which would, if it wins support, force gambling operators based overseas to pay a levy on gross profits taken on horse racing bets. Betting companies based in Great Britain currently are subject to the levy.

The amendment is due to be introduced during the third reading of the Bill in the House of Lords, which is scheduled for 18 March. The Bill reached report stage in the Lords earlier this week where a proposed amendment to give regulatory body the Gambling Commission the power to order the blocking of financial transactions to unlicensed remote gambling operators was narrowly defeated in a vote.  If the amendment is approved during the third reading, the Bill will need to go back to the House of Commons.

In a document published in October 2013, the Gambling Commission indicated that it was unlikely that the Bill would "need much parliamentary time" and explained that the new regulatory regime would be introduced three months after the Bill receives Royal Assent.

The Bill was originally introduced to the House of Commons in May last year and it had its second reading in the House in November 2013. However, since then the timetable for the passage of the Bill has slipped and, with a new amendment on the table, the reforms could be still further delayed.

Under the Gambling (Licensing and Advertising) Bill, all gambling operators, wherever they are based, would be required to obtain a remote gambling licence from the Gambling Commission if they wished to provide remote gambling services to consumers in Great Britain. The new law, if introduced, would bring many foreign-based operators within the scope of direct regulation by the Commission by altering the licensing regime to one based on where bets and wagers are placed –  the 'point of consumption' (POC) – rather than where the operator is based – 'the point of supply'.

Late last year gambling law experts Susan Biddle and Audrey Ferrie of Pinsent Masons, the law firm behind Out-Law.com, also flagged up delays in the timetable for the passing of the Bill and identified another potential issue that could delay the reforms further. They referenced reports in the media that suggested that the Gibraltar Betting & Gaming Association (GBGA) may consider asking for a judicial review challenge against some of the proposed reforms.

In November last year the GBGA set out an alternative to the Government's proposed POC approach. The alternative regime would involve a form of 'passporting', where remote betting operators based in "rigorously regulated jurisdictions such as Gibraltar" would be able to serve gamblers based in Great Britain.

The GBGA questioned whether the Gambling Commission would have the power to "inspect offices and servers in other jurisdictions" and said that, under its plans, reciprocal arrangements could be drawn up between the Government and other countries to allow obligations relating to tax, data protection, anti-money laundering and consumer protection to be addressed.

Separately from the new Bill, the UK government has decided to implement a new tax regime for remote gambling. This also follows a POC approach, although there are slightly different rules proposed for determining when remote gambling operators would be subject to the regulatory regime and for when they would be liable to pay the POC tax that is to be applied.

Further details about the tax plans of the government are expected to be detailed in Chancellor George Osborne's budget announcement on 19 March. The government initially proposed placing a 15% POC tax on remote gambling profits. It has estimated that the new tax rules will bring in approximately £300 million in additional tax revenues.

A previous study undertaken by Deloitte on behalf of William Hill, however, warned of the dangers of placing too high a POC tax on remote gambling operators wishing to conduct business in Great Britain. It said that the imposition of a 15% POC tax rate could have the effect of pushing up to 40% of customers towards unlicensed betting sites. This is supported by a September 2013 report from KPMG commissioned by the Remote Gambling Association. The report proposed a tax rate of not more than 10% and also recommended that the tax be calculated on gross profits rather than gross gaming revenue and in particular that the POC tax should be charged on gambling revenue after deduction of bonuses and free plays.

Similar concerns were raised by the UK parliament's culture, media and sport committee in the UK parliament in a report issued last May.