January 18, 2010

UK proposes rule changes, online gambling stocks fall

Last week, the UK government announced plans to change their online gambling regulation procedures. These plans include stricter licensing requirements for all operators, along with a new levy on offshore internet gambling firms that offer their services to British players.

The proposed changes would also require all licensed online sportsbooks in the UK and abroad which cater to Britons to monitor all member activity, watching for “suspicious” betting patterns. These reports would need to be made available to gambling regulators in the UK.

“The new system outlined today will ensure that all businesses offering online gambling to our consumers adhere to our rules -- not someone else’s”, explained Sports Minister Gerry Sutcliffe when the announcement was made last week. “This is also about making sure overseas firms contribute their fair share towards regulatory costs and vital services like problem gambling treatment.”

As a result of the announcement, stocks in two major online gambling companies dropped several pence each. These firms, William Hill and Ladbrokes, both offer internet betting in the United Kingdom. Both were originally based in the UK, but relocated their central offices to the offshore tax haven of Gibraltar in August 2009 to avoid local gambling tax hikes.

While levies have been mentioned, taxation of foreign operators has not. According to a Treasury spokesperson: “The focus of the Department for Culture, Media and Sport (DCMS) review was on the regulation – not taxation – of remote gambling... The Treasury will continue to work with DCMS to ensure that any implications for tax policy, arising from the proposals, are properly considered.”

The UK government has shown willingness to negotiate, and says it will discuss plans with both Ladbrokes and William Hill, along with other companies that will be effected, before making any final decisions.

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