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The Gibraltar Betting and Gambling Association’s challenge to a point-of-consumption tax enacted last year by the United Kingdom will be referred to the Court of Justice for the European Union (CJEU), according to a UK High Court ruling issued earlier today. The switch to the European Union court victory represents a minor victory in the ongoing battle between the UK and the GBGA, which represents 20 prominent online gaming and sports betting firms, the vast majority of which have moved their corporate headquarters to Gibraltar over the past decade.
In the ruling issued this morning by Queen’s Court Justice Sir William Charles, the court finds that the GBGA’s claim that the UK’s new point-of-consumption tax (POC) may possibly violate Article 56 of the Treaty of the Functioning of the European Union (TFEU). That article is supposed to assure free trade between EU member states (though technically, Gibraltar is not a full EU member). Article 56 prohibits restrictions on the movement of goods and services between EU member states, unless those restrictions are for the protection of the target country’s consumers — in this case, online bettors in the UK.
The POC was enacted by the UK last year after several years of legislative debate in order to achieve multiple goals including, according to the UK gambling commission, including the protection of UK gamblers from unlicensed operators and the repatriation of tax revenue the country’s government believes it is owed. The GBGA’s complaint argues that the protection of the UK-based punters is a smokescreen, and it’s the tax revenue the UK wants that the real battle is all about.
Of course, the very reason that many of the GBGA’s member gaming countries moved from England to Gibraltar, the famed promontory at the entrance to the Mediterranean Sea, was to take advantage of Gibraltar’s tax-haven opportunities. The special territory offers online-gambling companies a low, low flat rate to do business from there, allowing them to operate virtually tax-free. Many of the now-Gibraltar-based companies have actively steered their clients from brick-and-mortar betting shops to online sites, thus averting the assessment of the already-existing 15% tax on land-based bets.
That same 15% rate is now assessed on online bets accepted from UK bettors, and it’s the proverbial 900-lb. (or 400-kilo, if you prefer) gorilla in the room: This legal battle is all about the 15% tax, and neither side wants to fully come out and state that fact.
Today’s ruling was accompanied by reports in several gaming outlets with a statement from GBGA CEO Peter Howitt, as follows:
“This is an important decision for all industries and it is quite correct that it should be determined by the European Court rather than within the country that has created this unfair position.
“We maintain that the tax regime introduced by Her Majesty’s Government skews the market in favour of domestic providers to the detriment of law abiding operators like our members, in clear breach of European law.
“Because of this sensible decision we now look forward to European judges considering this matter and believe they will confirm our position.”
While it is quite reasonable for the case to be heard by the CJEU — at an as-yet-to-be-determined future date — whether the UK’s law is any way discriminatory is an entirely separate matter. Domestic UK gambling firms, those few that remain, anyway, are subject to the same 15% tax. Further, it seems apparent that the UK needs to charge ongoing license fees and tax assessments to continue administrating its new and expanded online-gambling regulatory regime, which includes the licensing of hundreds of UK-facing operators.
In other words, the GBGA has successfully made a case for why the final word on the matter should come from a European Union court, rather than a UK one, but in objective terms, it’s still a heavy dog in this fight. Several of today’s reports crowed about the fact that the UK might be forced to refund all taxed collected since the new POC tax went into effect late last year. That’s true enough; they technically could.
But it’s a sucker’s bet. The CJEU has already allowed other individual European regimes to set up similar licensing and taxation structures, and the UK’s approach differs little from that found in countries such as France and Italy.
(Note: The opinions expressed herein are those of the author only, and do not necessarily reflect the beliefs or views of SportsBettingOnline or its owners.)
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