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The effects of the Gambling (Licensing & Advertising Bill)

8th May 2015 Print
Gambling Law

Last year saw the United Kingdom change its online gambling regulations with the introduction of the unique Point of Consumption Tax (POC).

This legislation means that all online casinos and other remote betting operators which do custom with British residents are now liable for tax at the point of consumption rather than the point of supply.

Online casinos, including new sites such as Titanbet Casino UK, offering services to UK residents are now required to pay tax in Britain regardless of whether they operate outside of the island.

Before this, online operators had not been subject to British tax due to being based in approved “whitelisted” jurisdictions (Gibraltar, Alderney, the Isle of Man or Antigua and Barbuda). Instead, their liabilities went to the more lenient tax regimes of the jurisdictions that they operate out of.

But with the 2014 Gambling (Licensing & Advertising Bill), online casino operators are now subject to a 15% tax on their gross profits from staked bets within the United Kingdom, whilst they also need to apply for a licence to operate within Britain.

The effects of the change in regulation have been analysed by numerous experts. Deloitte found that the online gambling operators are to ramp up their marketing expenditure for 2015 as they look to increase market share, consolidate their position and shelter them from the impact of the 15% tax. 

That is fine for the bigger companies who have the budget to buy plenty of television, newspaper and internet adverts. However, the smaller companies are simply going to be outspent and reduce their customer base in the process, which in turn gives them less protection from the new tax regulations. There are some that believe smaller operations may not survive for too long in this new environment.

Many online gambling outfits are also looking into social media gaming. Although monetary prizes are subject to taxation, other prizes are available. No operator has truly been able to conquer Facebook, but if someone took the time this year to extensively research the platform, before bringing some sort of social gambling experience to the masses, they would see the popularity rise to stratospheric levels. 

The first betting operator to crack Facebook will quickly find itself as one of the industry’s market leaders, if not already. It is reported that Facebook has 2.2 billion users, or a third of the world’s population. Having a presence on Facebook has to be the goal of every gambling operator.

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Some commentators believe that the regulation could have a perverse impact on consumer behaviour. Deloitte reported that even a POC tax increase of 5% could see 13% of Britain’s online gambling customers move away from the regulated market and move into the grey (non-regulated) area. An increase of 15% could send as many as 40% of the consumers into the grey market. A growing, non-regulated market is detrimental to the government’s attempt to generate tax revenues whilst also leading to less customer protection for those in the grey market, the polar opposite of the original intention.

We are still in the early days of this new relationship. Whether the new regulation will cause the market space to shrink, social media betting to expand, or a grey market to develop remains to be seen.

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