CJEU Issues Preliminary Ruling Against GBGA Challenge to UK Remote Gambling Tax

“Again, no.” That’s the most succinct way to sum up the latest happenings in the ongoing efforts by the Gibraltar Betting Gaming Association (GBGA) and its member companies to find a legal away to avoid compliance with the United Kingdom’s 2014-enacted point-of-consumption tax on online-gambling services.

This week the Court of Justice of the European Union (CJEU) issued its preliminary ruling in the ongoing legal battle between the GBGA, its member companies, and the United Kingdom’s tax authorities. In essence, the CJEU’s ruling reaffirms that, for the purpose of online trade and the point-of-consumption tax, Gibraltar is part of the United Kingdom, and that the online-gambling operators there are indeed subject to pay a remote tax on revenue generated from online services to customers in other parts of the UK.

This matter had been simmering within the CJEU since 2015, when the GBGA protested the application of the remote tax to the Gibraltar companies; the UK’s Quens Court stayed its own ruling against the GBGA so that the matter could be moved on to the CJEU.  The GBGA claimed its member companies were not legally subject to the remote tax, being in Gibraltar.  The primary argument offered by the GBGA was that the POC tax was a violation of free trade between based between two EU member states.

Except Gibraltar, a UK protectorate, has never been an independent, European Union member state.  It took the better part of another two years, but there was never much doubt that the CJEU would view the GBGA’s claims as, well, the same sort of bunk they were to begin with. Gibraltar is not an independent member entity of the EU, nor is it fully a part of the United Kingdom. However, it is a protectorate of the UK, and as such (and as was, really, known all along), it remains subject to UK law.

But with many hundreds of millions of pounds in tax revenue at stake on an annual basis, and the fact that Gibraltar’s own future as an online-gambling hub is imperiled by the legal reality, any last legal gasp was going to get a whirl.

As the ruling summarized, “Article 355(3) TFEU, in conjunction with Article 56 TFEU, is to be interpreted as meaning that the provision of services by operators established in Gibraltar to persons established in the United Kingdom constitutes, as a matter of EU law, a situation confined in all respects within a single Member State.”

What it means is that the tax loophole that incentivized all those former British stalwart gambling firms to relocate to Gibraltar has now been closed. No tax loophole for UK-facing business, plus the approaching Brexit separation, also means that Gibraltar will no longer have any special draw for gambling firms seeking to serve the rest of Europe as well.

As we’ve written before, that’s a problem for the GBGA member firms.  A couple of former GBGA members have already pulled up stakes for other environs. Malta, south of Italy, still beckons as perhaps Europe’s next hub.

Take a look at the current GBGA membership. The trade group is now down to 19 members, after having more than 30 just a couple of years ago. Still part of the GBGA, but no doubt weighing their future options, are 32Red, 888 Holdings, Bet 365, Betfair, Betfred, BetVictor, bwin.party, Digibet, Gala Coral, Gamesys, Gtech, IGT, Ladbrokes, Lottoland, Mansion, Nektan, Stan James, Tombola, and William Hill.

Expect the GBGA to shrivel further, if it doesn’t wither and fade from the scene altogether. It’s the nature of the online-gambling scene to change according to perceived business advantage, and though there are some modest advantages to being in Gibraltar, for an online-gambling firm, it’s just not what it used to be, nor is it likely to return to that any time soon.