George Osborne is reported to be moving ahead with proposing the new tax regime today in the House of Commons. As reported towards the end of last week on government is looking to introduce a secondary licensing scheme that will involve offshore gambling companies paying tax for targeting the UK market.

What is being reported is that offshore gambling companies get a license to target the UK whilst paying 15% gross profits tax and corporation tax. Offshore gambling operators currently pay no UK tax but they pay a lower % of tax in their respective offshore jurisdictions such as Gibraltar and Alderney.

The offshore gambling companies will be certain to be taxed in the same or a similar way as firms operating on UK soil. As stated in the Guardian’s article yesterday, online gambling companies based in the UK will argue that “they are disadvantaged by VAT”.

Some of the biggest bookmaking companies are licensed offshore in jurisdictions such as Gibraltar, Alderney and Malta. These include Betfair, Betfred, William Hill and Ladbrokes. These are all household names in the UK that are not paying tax in the UK technically. Reports suggest that these bookmakers would try to negotiate paying a 10% rate instead of the rumored 15%.

One concern about the government introducing this new tax regime for online gambling companies is that the tax may negatively affect their revenues. This could pave the way for these big offshore gambling companies to be moving back to the UK. Whilst these offshore companies are comfortable in their respective jurisdictions, this new tax scheme might prove too costly for them to compete within the UK competitively.

Saying this, George Osborne will not be giving a lot of details of the new tax regime today. It will merely get the ball rolling with the proposed tax rate being introduced in the near future. News of the change in policy for the UK government has already negatively affected a couple of the big FTSE 250 firms. Ladbrokes and William both moved their online operations to Gibraltar back in 2009 to avoid paying UK tax. According the ShareCast, Ladbrokes was down 1.8% in afternoon trading whilst William Hill was down 1%.


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