UK is the loser in betting exodus

Offshore gambling operations are estimated to cost the Government £300m a year in tax revenue

The last major gambling company with an onshore sportsbook is set to quit Britain if the Government fails to equalise the tax paid by offshore operations with what UK firms pay. Gala Coral's group chief executive Carl Leaver says this would be "sad", but warns that onshore betting taxes are crippling his business against rivals.

The location of the group's online sportsbook is now under "constant review". Industry figures suggest that the Government is losing £300m a year as a result of the gambling industry's internet and telephone operations moving offshore. Coral and Bet365 are the only two major firms left in the UK.

Tory MP Matt Hancock, whose Suffolk constituency includes Newmarket, horseracing's HQ, thinks he has the solution. He has tabled a Bill which would change the way the tax works by charging it on the punter's location rather than the bookie's.

This would be achieved by making it illegal for a company to accept bets from UK citizens without paying the tax and holding a licence from the Gambling Commission. For the sake of some of his important constituents, Mr Hancock also wants the levy on bookmakers racing profits – which funds the sport – to be treated similarly.

Just as Government revenues from the tax have been tumbling, so has the levy, and horseracing is in the midst of a funding crisis as a result.

Mr Hancock's Bill has its second reading on 30 March, although as a "10-minute rule bill" it faces an uphill struggle for Parliamentary time.

"The Bill (would) bring the main offshore gambling platforms onshore by making it illegal for them to accept bets without paying tax and levy. It will be classified as a bet in the UK if that is where the punter is," he says.

Some betting companies might chose not to comply. But, says Mr Hancock: "They would be illegal. Of course you have to make enforcement effective, ban their ads, and their executives wouldn't be able to come to the UK without facing sanction."

A spokesman for the Department for Culture Media & Sport says the Government supports the intention to regulate remote gambling on a "point of consumption basis" and is "committed to bringing forward a Government Bill as soon as Parliamentary time allows".

But that won't be this year – or next year. However, if Mr Hancock's Bill passes its second reading and reaches committee stage the ministry says it will be supported "albeit with a few technical amendments".

Mr Leaver would be relieved at that prospect, because for his company, time is running out: "Right now there is no competitive advantage to being onshore other than, perhaps, securing a better relationship with racing and even that is debatable."

He is also annoyed that betting shops "which create jobs in the UK and pay rent on the high street" are crippled by taxes which "remote" rivals don't face.

"That seems a topsy turvy situation because offshore creates no employment. We want to see all offshore gaming taxed in the same way and at the same level as onshore. If not, then there is no way we could continue to see ourselves disadvantaged in this way."

Those bookmakers that have moved offshore are wary. Ciaran O'Brien, corporate affairs director at Ladbrokes, says: "We pay more tax than we retain in profit. The Association of British Bookmakers' figure for the industry shows that it paid £1bn in tax and yet retained just £600m in profit. We are working harder for the Government than we are for ourselves.

"Let's say you set a very high tax rate. How would you enforce it? There will be a lot of people outside the net. The experience of the Government here when they extended the gross profits tax at 15 per cent (in 2005) was the death knell for any operators onshore."

On the issue of enforcement, Mr O'Brien argues that even when advertising gambling was banned under the old Gaming Board, ads still appeared for offshore online casinos on the tube.

He adds: "We would welcome a full, proper review. The sensible option would be a low rate (for remote gaming) to bring everyone in, at point of consumption. The other option would be a rate of say 10 per cent for all betting."

Mr Leaver would agree with the latter: "We would like to see some of the money that the Government recovers (from offshore gambling) invested in easing the burden on outlets like betting shops and bingo halls which create jobs."

Interestingly, at least one offshore operation is now looking to move onshore. Bodog, based in sunny Antigua, is about to relocate here.

Its UK chief executive, Patrick Selin, says: "All over Europe you are seeing a trend to make taxes on gambling higher. Different countries are doing different things to enforce this. Some are trying to get ISPs (internet service providers) to block gaming, others to get the banks to stop dealing with betting sites.

"The UK has the best tax. The lowest of all in Europe. There are benefits from being onshore too. You are more credible and there are more marketing tools, deals with newspapers, football clubs. It is also easier to employ talent."

As for horseracing, it should be cheering from the sidelines. But maybe not.

Will Lambe spokesman for the British Horseracing Authority (BHA) says there is a problem: making the levy part of a "point of sale" gambling tax could violate EU rules on state aid for industry.

"Certainly it is clear that the regulatory system for remote betting platforms isn't working... but there are state aid concerns if you bring in secondary licencing (along with a new tax)."

William Hill, the largest levy payer in the UK, agrees: "There are state aid issues in extending the current levy scheme to offshore operators through any mechanism. Levy would not necessarily follow regulation or tax."

And as for that tax? "There is now a significant body of evidence... which shows that a controlled closing of the UK market at a double-figure tax rate with weak enforcement will be bad for customers, bad for competition and would produce limited tax yield."

Both the BHA and the bookies say they support replacing the levy with a commercial deal. Ministers have been pushing for this too, although they inevitably end up with refereeing a new levy (which is statutory) each year.

The BHA now wants bookies to pay for a "right to bet" on horseracing: "We need to capture all betting on racing, no matter what the platform is. We need a level playing field," says Mr Lambe.

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