The United Kingdom's Chancellor of the Exchequer, Philip Hammond, presented his budget for the coming year on Monday, Oct. 29, 2018. Among the changes he described is an increase in the Remote Gaming Duty (RGD) from the current 15% to 21%. This is a tax that online gaming sites have to pay on their profits derived from U.K. residents.
The RGD applies to online casino and poker operations. Sportsbooks and betting exchanges fall under the purview of separate taxing regimes. The new rate of 21% will become active on Oct. 1, 2019. Internet gambling sites thus have almost a year to prepare for the increase.
The current 15% tax was established in 2014. It's a point of consumption tax, much like the one recently enacted in Victoria, Australia. This means that it's charged based upon gross gaming revenue derived from patrons located in the United Kingdom regardless of where the firm accepting the bets is headquartered.
The Conservative government appears willing to penalize people engaged in what it deems to be immoral conduct. As part of the new budget, Hammond revealed that the imposts on cigarettes and wine are also going up. This reeks of paternalistic government surveillance and control over what allegedly grown-up citizens can do with their own money and bodies.
News of the higher online gambling tax didn't take anyone by surprise although nobody was really sure what the exact rate would be. You see, when the government decided to reduce the maximum stake on fixed-odds betting terminals (FOBTs) from £100 to £2 in May, it was widely anticipated that the revenue shortfall from diminished betting shop duties would be covered by raising the taxes on online gaming.
Indeed, the imposition of lower limits on betting terminals has been pushed back to the same Oct. 1, 2019 date as the new RGD, further confirming that the two are linked. Government forecasts show that the losses from one taxing stream will be more or less offset by gains in the other.
The new 21% levy is expected to result in £130 million in additional revenue during the first year and £255 million for each of the following two years. Taxes from FOBTs, on the other hand, will drop by £120 million in the first year and £245 million annually for the next two years.
While these two distinct moves are basically a wash from the point of view of the authorities, it's a different matter for the companies directly affected. Betting firms will see their brick-and-mortar operations become less valuable as a consequence of the FOBT restrictions while their online endeavors will similarly be dampened by their obligation to hand over 21% of their revenue.
[UPDATE: November 21]
When Philip Hammond announced that the reduction in maximum FOBT stakes to £2 would become effective in October 2019 to coincide with the increase in RGD from 15% to 21%, this was a significant delay in implementation from the original timetable for lowering the FOBT limits. His budget presentation triggered a wave of outrage from anti-gambling partisans who were dismayed that the current max bet, £100, would continue to be allowed for almost a year more. The ensuing political infighting resulted in the resignation of Minister for Sport, Civil Society, and Loneliness Tracey Crouch who felt that the delay was negotiated behind her back at the last minute by pro-gaming factions.
On Wed., Nov. 14, Culture Secretary Jeremy Wright released a statement explaining that the government was moving forward the schedule for the change in FOBT betting maximums. Acknowledging that many MPs had been pressing hard for the new limits to become active sooner rather than later, Wright stated, “The government has listened and will now implement the reduction in April 2019.”
The policy paper from HM Revenue & Customs describing the increased Remote Gaming Duty contends that “This measure is expected to have a negligible impact on a small number of medium-sized and large businesses who provide online gambling services to UK customers.”
We're astounded that anyone could think that a 6% increase in tax rate will have just a “negligible impact” on the businesses affected. Indeed, Clive Hawkswood, the Chief Executive of the Remote Gambling Association industry group, commented, “An increase from 15 per cent to 21 per cent for RGD is a steep hike in tax that will cost the sector upwards of another £250m per year.” He did concede, however, that “it could have been markedly worse at 25 per cent, which was being mooted earlier.”
Affiliates too are smarting from the decision to raise the RGD. The gross gaming revenue that internet gambling corporations collect has to be allocated to pay for taxes, payroll, software development, advertising, and all the other expenses involved in running an online enterprise, including, yes, affiliate commissions. Some entities, particularly those now planning to shrink their footprint in the British market, may decide that affiliate expenditure is the right place to make cutbacks. We can expect smaller payments to the affiliates who help drive customers toward gaming websites, and some enterprises may even terminate their U.K.-facing affiliate programs altogether.
Taxes are just one of the obligations that online poker rooms, casino organizations, and bookmakers must undertake when they obtain licensure to transact in the United Kingdom. They also subject themselves to the mandates of the United Kingdom Gambling Commission (UKGC), Advertising Standards Authority (ASA), and other regulatory bodies.
The decrees of these watchdog groups have become very stringent, and they sometimes border on the ludicrous. For instance, a PokerStars ad was found to encourage reckless gambling because it depicted a player making a bluff. And Tabcorp was held to be liable because one of the bets it offered allegedly caused an athlete to break the rules of his sport.
These seemingly arbitrary rulings make it harder to do business in the country. Combined with the higher tax rate just announced, they could drive many operators to leave the United Kingdom and focus on other markets instead.
Of course, companies that dispense with a UKGC license altogether don't have to worry about these requirements. They're not allowed to legally accept British customers according to the letter of the law, but they can safely ignore this rule because they're housed in offshore locations where Whitehall has no power.
Take, for instance, Sportsbetting.ag on the Chico Poker Network. It cares not about U.K. law because it's based in Panama. It's nevertheless an upstanding gaming operator as evidenced by our monthly offshore gaming payout report in which it consistently scores high marks. SB.ag boasts a poker room, sportsbook, racebook, casino, and several other gambling products. Consult our detail-laden Sportsbetting.ag review for further info, including signup instructions and a description of the site's 100% up to $1,000 poker bonus.