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Tax obstacles to UK regulation drive

Discussion in 'Casino Industry Discussion' started by jetset, Nov 5, 2006.

    Nov 5, 2006
  1. jetset

    jetset Ueber Meister CAG

    Senior Partner, InfoPowa News Service

    Ministers concede that regulatory issue is getting tougher, but Ladbrokes may have an answer....

    Despite the positive vibes emanating from last week's 32 nation Remote Gambling Summit near London the UK newspaper The Observer took a rather dark view of the regulatory issue in a weekend article.

    The newspaper claimed that the UK Government's drive to tempt online gambling firms to pay tax in Britain "...appears doomed as even ministers admit that the move is running into serious difficulties."

    Treasury minister John Healey told tourism industry leaders at a briefing last week that the government is having problems fixing a tax rate to persuade online gambling firms, currently based in tax havens, to pay tax in the UK.

    Benefits for gaming firms would be a kitemark from new industry regulator the Gambling Commission. But senior Whitehall officials now concede there is little chance that online firms will base themselves in the UK, as envisaged when the government argued for the liberalisation of tough gambling laws.

    The Treasury must come up with a tax formula next year when the Gambling Act comes into being. A senior civil servant says gambling firms will make a 'commercial decision' as to whether they decide to move 'onshore'. But companies say they save huge sums by not having to pay corporation tax and VAT in jurisdictions like Gibraltar and Malta.

    A possible compromise put forward by Ladbrokes is that the industry pay a proportion of turnover to be invested in a fund to treat gambling addicts in return for a British government kitemark.

    John O'Reilly, head of Ladbrokes' internet division, said: "The UK has a reputation for being really well regulated not just in gambling but in financial services and other sectors. A kitemark is a benefit I would want to pay for."

    Meanwhile, the wave of consolidation that many have predicted for the online gambling industry may be further off than has been previously suggested.

    Industry insiders are playing down any imminent takeover, which could see Ladbrokes buy either PartyGaming, the biggest internet poker firm, or 888.com, the largest internet casino operator.

    Talks have been held between representatives of the three parties but any deal would be months away.

    Commenting on the Financial Mail report that Ladbrokes was eyeing Party Gaming and 888.com as possible merge or acquisition targets, source close to 888 said: "The founding shareholders [of 888.com] are not desperate to sell, because they believe in the long term business."

    Many online gaming companies have been in tie-up talks as they search for potential synergies to improve margins after the United States effectively banned online gaming last month.

    PartyGaming spokesman John Shepherd declined to comment on potential acquisitions but added that the company had continued to reduce its cost base by cutting jobs. "Out of the 1 750 staff in India, we had to let go of 800," he said.

    "It was necessary to reduce the cost base as a result of illogical, ill-conceived and inconsistent prohibition legislation in the United States," he added.

    PartyGaming offered other companies in Hyderabad, India the employees it was losing, said Shepherd.

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