What Impact Will the UK’s Point of Consumption Tax Have on Bookies?

UK-facing online sports betting operators are poised to take a big revenue hit when a new, 15% point of consumption tax (POCT) takes hold on December 15. The tax is part of the he Gambling (Licensing and Advertising) Act 2014, which includes new rules on who needs to hold UK gaming licenses.

By levying a tax on wagers placed by a, “UK person,” Her Majesty’s Revenue & Customs (HRMC) department is hoping bring in tax revenue from British bookmakers who dodge UK taxes by basing their operations offshore. The POCT is projected to put an additional £300 million ($504 million USD) in British coffers every year.

Not surprisingly, the POTC is pretty unpopular with affiliates and offshore operators alike.

William Hill, one of the UK’s largest bookmakers says the POTC will take a whopping £60 million-£70 million ($100-$117 million USD) off their bottom line every year. According to the Financial Times, William Hill has already made cuts in the neighborhood of £15 million-£20 million ($25-$33 million USD) to help absorb the impact.

By way of example, Paddy Power representatives told the the Financial Times the POTC would have shaved €37 million ($49 million USD) off their 2013 revenues.

For casino affiliates who are operating in competitive markets with slim profit margins, the POCT could hardly come at a worse time.

For starters, they know that operators will need to make all that lost revenue somewhere and affiliate payouts are a great place to start.

Affiliates have also seen operators throwing big bucks at their own player acquisition campaigns in the hopes of building up their customer bases before the POCT takes hold. Those aggressive marketing efforts can’t help but grab players who might have found their way to operators through affiliates in better times.

The POCT is also expected to have a big impact on tax-havens like Malta and Gibraltar. Online gambling is a huge business for these tiny principalities and they’re worried the POCT will cause operators to move back home to save expenses.

Licensing authorities and regulators in offshore tax havens are also angry at how they’ve been portrayed by UK lawmakers. They say POCT clauses requiring operators serving UK players to hold UK gaming licenses are a slap in the face to their rigorously controlled regulatory schemes.

In response to the POCT, the The Gibraltar Betting and Gaming Association (GBGA) says it will be taking legal action against the UK in hopes of shutting down the Gambling (Licensing and Advertising) Act 2014 and POCT entirely.

Whether the GBGA can shut down the POCT remains to be seen. What is very clear, however, is that the UK is very serious about collecting taxes from online gambling companies and that’s going to have serious implications for everyone involved.