Remote Gaming Duty taxation level to be announced in Brit Budget

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NEXT UK BUDGET TO REVEAL LOW ONLINE GAMBLING TAXATION?

Speculation that British Chancellor will announce Remote Gaming Duty

The Telegraph carried encouraging news this week that Britain's Chancellor of the Exchequer, Gordon Brown will announce plans in next month's Budget to encourage the online gambling industry to be regulated and licensed by the UK Government.

The Telegraph reports that the Treasury has long had its eye on the potential tax revenues that are generated by the likes of PartyPoker, 888, Ladbrokes and other gaming companies that are based in Gibraltar and other offshore centres.

From September 2007 the companies will be allowed for the first time to relocate to the UK and obtain a licence under the Gambling Act. However, the offshore gambling companies have said they would never relocate to the UK if they had to pay a tax on gross wins as high street casinos do. Bricks-and-mortor casinos pay tax of up to 40 percent depending on their size.

The Telegraph claims that in a surprise move, the Chancellor will use the Budget to announce that in return for a small amount of tax - possibly as low as 2 percent or 3 percent - companies can obtain a UK licence and still remain based overseas. The new tax will be called Remote Gaming Duty. This compromise would allow gambling companies to avoid British VAT (Value Added Tax).

Crucially, the exact rate has yet to be decided but John O'Reilly, the head of online gambing at Ladbrokes said he was pleased with the deal, saying: "It's quite a breakthrough."

He confirmed that if the rate was less than 3 percent, Ladbrokes would almost certainly sign up for a UK licence. "We want to be regulated by the UK Government," said O'Reilly. The company's online gaming division generates GBP100 million, so the move would generate between GBP2 million and GBP3 million for the Treasury.

The UK government's willingness to embrace online gambling is in sharp contrast to the authorities in the United States, which last year launched a drastic crackdown on financial transactions within the industry.

The success of the plan depends on the exact level of Remote Gaming Duty, but Andrew McIver the chief executive of Sportingbet, currently based in Antigua, said he intended to apply for a UK licence if the duty was "a nominal amount".

Clive Hawkswood, the chief executive of the Remote-Gambling Authority, the online gaming trade body, justified the low rate of tax because "...these companies have grown up in zero tax jurisdictions. They operate on very thin profit margins. A 15 percent gambling duty would wipe out half the industry overnight."