It is no secret that the offshore territories of the UK have done really well out of the fact that the offer tax havens to the UK-facing online gambling industry. This applies to Alderney, Gibraltar, the Isle of Man, Malta and recently even the Isle of Jersey, although Jersey seems to have come on board rather Late.

Now that the British Government has been looking for ways to tax online gambling services, rather than making taxation more attractive for existing as well as start-up operator, they are thinking of a point of consumption tax. This seems quite a sensible move, as offshore operators benefit from offering gaming to UK customers, but only paly local license fees and taxes.

The introduction of a point of consumption tax seems ready to go ahead, and should be in place by December 2014. The remote gambling industry are obviously keen to find out how this tax will affect them so, neighbouring gambling jurisdictions need to be thinking ahead regarding these new regulations.

The Economic Development Minister of the Isle of Man’s – John Shimmin – is already rolling-out a new five-year plan of strategy to ensure they keep on top of things. He is quite rightly of the opinion that the sooner they take a pro-active approach, the better off they will be. We have to bear in mind here that the online gambling industry revived the economies of these island states to a great extent. It creates highly paid, highly technical jobs, generates tax income and has seen many professional relocate to be closer to where they work. Their spending stimulates these economies too.

The planned tax regime for 2014 has John Shimmin concerned that with better taxation regulation in place, firms may be tempted to relocated back to the UK. This would mean the Isle of Man (and the others) may lose some of their licensees. It is obvious that they should be prepared for this, and that they should also be able to offer incentives for firms to remain. They have already signed a tax sharing agreement with the UK, and met with the UK Gambling Commission.

Shimmin has guaranteed their support their to e-gaming operators, and confirmed that they fully understand any implications that may affect their regulatory regime. They are still seeking to attract even more new licensees, so, business must be good. Currently big names such as PokerStars, Paddy Power, and the new Full Tilt Poker, amongst others are firmly entrenched in the Isle of Man.

It is not the first time we have heard mention that tax Cuts could be looming for British online gambling ops. It is also no secret that most of these operational companies have joined the exodus to more temperate climes. Most UK online gambling concerns, even the BIG guys such as William Hill, long ago ran away to "White Label" shores such as Malta, Gibraltar, Isle of Man and Alderney.

However, this does not prevent large operators from offering this form of virtual entertainment to a UK-facing audience. Therefore the UK Government needs to find a way to bring some potential tax pounds back to the country. The best and most obvious way to do this would be to offer tax cuts. But will the Government actually enact this – that is the multi-million pound question?!

If we think about it logically, gambling is a numbers game, but then so again is collecting tax. So, we ask you a simple question, would you rather have 5% on millions of pounds of potential income? Or would you rather have 15% of nothing? It doesn’t take rocket science to see that online gambling firms have left the country to take advantage of tax shelters for very obvious reasons.

Apparently now Government Ministers are seeing the madness in the tax situation, it has taken the longest time; and is hoping to encourage operators to base themselves in, or return to Britain.
One thing that is for certain – IS – online gambling is going nowhere at all, and unprecedented growth is being seen in this industry still. Mobile gambling growth using Android, iPhone, iPad, and other tablets, and smartphones, is becoming an off-the-wall trend. This kind of growth in popularity and spending is just too good to resist not getting a share.

While the Government in the UK, mulls over the idea of tax cuts on revenues from this massive growth industry, the Governments of Alderney, Gibraltar, Isle of Mann, and so on, are all cashing in on what has become a mainstream industry. These territories are also cashing in on the perks that work hand-in-hand with healthy industry – job creation for example.

Rumour has it that taxes in the UK will be cut from 15 to 10%, but we don’t really know if 5% would make all that much of an impression. 10% does bring it in line with some other territories, but whether this will be incentive enough, still remains to be seen. The wheels of law-making turn slowly, and we all know that money likes speed. Perhaps a little less "mulling", and a little more action might be required.

We have been reading in the news that the large online gambling concerns, which offer offshore services to UK residents, may be in for beneficial tax-cut to lure these industry players back into the country. While we think this is a very fine idea, whether it ever comes to fruition or not, still remains to be seen.

Recently there have been massive protests against the fact that industry giants such as Amazon, Google and Starbucks have been involved in corporation tax avoidance. Apparently the government has also been aware of this and has failed to crack down on defaulters. In the meantime, an across the board tax of 15% applies to all gambling concerns, and this has seen an exodus of big brand names such as Ladbrokes, William Hill and other interactive divisions of brands, taking to the hills to license their products offshore.

While this has provided big business for Gibraltar, Isle of Man, Alderney, Malta and other independent members of the ex-British Empire. It does not do a lot for Her Majesty’s Customs and Excise coffers. Not when we bear in mind that the majority of the customers who follow these big name brands are actually situated in the UK.

Luring interactive gambling industry giants, and even the smaller concerns, does not only mean licensing fees will be filling up UK tax coffers. The industry is a mostly high-tech concern, and therefore highly paid people are employed in jobs, office space is required for hardware, software designers, financial, administrative, and all kinds of other highly paid people, and all of these people pay tax. An active industry also stimulates the economy too.

As an example perhaps we should look at Tombola Bingo. This is one of the very few interactive online bingo concerns that keepsoffices in the UK. Although they too are licensed in Gibraltar, they have offices based, and employ people in the Sutherland area. Despite the strict tax regime, which is even tougher for the bingo business in Britain, this business has continued to grow, and has on more than one occasion actually doubled in size.

With attractive tax cuts scheduled – which seems to be what Chancellor George Brown is planning, Britain’s biggest gambling companies could move back to the land of their birth. Despite the fact that this is a highly controversial move, if we think about it in pure numbers terms. It is far more economically beneficial to have twenty online gambling companies paying licensing fees, salaries, overheads etc, as well as 5% or 10% tax. Than it is to have NO online gambling companies paying any of the above expenses we listed.

Bearing in mind that there are hundreds – if not thousands – of online gambling concerns offering services to the residents of the UK; the more attractive the government makes it for them, the better it is for everyone in the long term.

According to The Mail on Sunday – "the Treasury is considering slashing the gambling levy by a third to recoup some of the £2.1 billion in revenues that has been lost over the last seven years."

William Hill could be taking a BIG gamble by taking on Her Majesty’s Revenue and Customs Service, but then again taking BIG gambles is their business! The British Bingo industry has done this and won when Mecca went to European Union Supreme courts to support their contention that they were being over-taxed on ‘interval’ bingo games. It was worth the fight for Mecca (the Rank Group); we can’t remember the exact figure, but at the end of the day HMRS had to pay back over £36 million. This sum made a very nice difference to their bottom line in the year it was paid.

William Hill wants to challenge the Tax on "online" gambling profits – they are moaning about 15% – but we think they should count themselves lucky, this is what land operators have to pay out, and land bingo operators are required to pay out even more. 15% is the proposed tax level for online gambling businesses, and quite honestly, as they have had to pay no tax at all for more than ten years in the biz, what the heck is their problem?

We’ll tell you what their problem is – In the 2012 half year report, William Hill profits reached a whopping £68.9 million just for their online business. Who wants to pay out 15% of money like that, when they have previously needed to pay nothing at all? Taxation for this industry in the UK is only planned to fall due from the end of 2014, when the Chancellor of the Exchequer wants to raise approximately £200 million from online betting. We would assume that this amount also includes revenues from other forms of Internet gambling enterprises.

Virtually all of the large bookmaking and other gambling firms in the UK, which offer online services have moved operations to offshore sites such as Malta, Gibraltar, Alderney and Isle of Mann, in order to escape UK taxes. But if we think about it logically, while they are offering services to a UK audience and earning profits from this, surely they should be subject to some sort of taxation. We have to remember that there are only two sure things in life – one is death, the other is taxes, and there is no escaping the facts.

The company has already briefed their lawyers to build a case against the proposed taxation, which will be a "point of consumption tax". Lawyers that specialize in gambling law have warned that under European Law it is illegal to restrict free movement of goods or services for tax purposes, but this has not stopped countries such as Belgium and other European countries from jealously guarding their online gambling borders. Whether William Hill will be successful or not, based on these precedents and what has become tacit, remains to be seen. But whatever happens in the end, it seems that William Hill is taking no chances, and just like Baden Powell taught the Scouts – we should always be prepared.