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'Kite-marks' could signify British-regulated betting websites, says Commons committee

A new "kite-marking system" could be used to encourage gambling operators to be regulated in Great Britain, a committee of MPs has recommended.

The House of Commons Culture, Media and Sport Committee said that the Gambling Commission, the Government regulator of commercial gambling in Great Britain, could set up such a system and that it could create the incentive for "suppliers to choose to be regulated here". 

"We recommend that the Gambling Commission should consider, as a part of efforts to communicate to online gamblers the potential risks to their funds, introducing a kite-marking system for gambling websites, indicating which sites are regulated in the UK," the committee said. "This could protect consumers by encouraging them to use UK-regulated sites and by incentivising suppliers to choose to be regulated here."

The committee's recommendation came in a report it published into the Gambling Act. In its report it said the Government had set tax rates for remote betting at too high a rate and that it had encouraged many betting operators to base themselves overseas, outside the scope of regulation. To address the issue it recommended a number of measures, in addition to the introduction of a kite-marking system, to encourage operators to return within the scope of British regulation..

The committee recommended that the Government should "look to encourage operators to base themselves in the UK" and set a 'point of consumption' (POC) tax rate that does not lead to an increase in unregulated betting.

Last year the Government announced plans to require all betting operators to obtain a licence from the Gambling Commission in order to take bets placed from British consumers, regardless of where the operators themselves are based. Economic Secretary to the Treasury Justine Greening subsequently announced that a POC tax would be levied on betting operators on remote transactions placed by British consumers.

"To give certainty to online operators, and their investment plans, we urge the Government to adhere to its timetable for implementation by December, 2014 and to make plans to deal with any challenges to the proposed new system," the committee said.

"However, the Treasury still needs to work with industry stakeholders to establish the correct level for online gambling taxation, taking into account the need to encourage companies to accept UK regulation and taxation and to discourage the formation of a grey market."

Earlier this year a study commissioned by William Hill estimated that placing a 10% POC tax rate on remote gambling could result in up to 27% of online consumer bets being placed in unregulated markets, unless effective enforcement measures were found to restrict the growth of that market. If the POC tax level is set at 15% as many as 40% of punters could turn to unregulated markets, the study said.Under the Gambling Act foreign companies must currently be licensed in certain 'white-listed' jurisdictions in order to operate within Great Britain. 

At the moment any gambling operator which wants to offer its services in Great Britain must be licensed or regulated in Great Britain, another EEA state, Gibraltar or one of the other states approved (“white-listed”) by the Gambling Commission.  However, offshore operators who are regulated in one of these white-listed countries or an EEA state or Gibraltar do not currently also require a licence from the Gambling Commission in order legally to take transactions from British consumers.

Under the UK's current tax regime UK-based betting operators pay a 15% tax based on gross profits on bets, but many high street bookmakers, including Ladbrokes and William Hill, have moved their online operations abroad where they are not currently liable for a tax on profits earned. Separately, UK bookmakers must also currently pay a levy on gross profits taken on horse racing bets.

In its report the Commons Culture, Media and Sport Committee also called for a different approach to be taken to checks on the regulation of foreign-based betting operators.

"We recognise that it would be unrealistic for the [Gambling] Commission to inspect directly individual regulators across all other jurisdictions," it said. "We recommend that the Commission should approve certain overseas regulators and continue to monitor their performance where they meet its requirements. The Commission should undertake test purchasing exercises to ensure that these national regulators continue to carry out sufficient licensing checks."

"Such an approach would have the merit of encouraging international co-operation leading, in due course, to a more harmonised, consistent and less bureaucratic regulatory system across the 27 member states. For the sake of confidence and market knowledge, the Gambling Commission should also test whether regulators it has not yet approved carry out sufficient licensing checks," it added.

"Even if the Gambling Commission does not directly assess individual operators for their suitability to hold a UK licence, it will therefore have to make an assessment of which regulators it will allow to act as its agents – regulating online gambling sites targeting the UK on its behalf. The Department for Culture, Media and Sport should make clear how the Gambling Commission will assess the effectiveness of other national regulators and what the Commission will require of its agents," the committee said.

Among the other measures that the Commons Culture, Media and Sport Committee called for was for the Gambling Commission to establish a new "licence fee structure" that would "charge all operators less than they currently are [being charged]."

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