James Moore: A little story of betting and benefit cuts

Outlook A question that investors might like to pose Betfair as its directors tour the City with the aim of securing their backing for its forthcoming float: why are you still onshore?

Nearly all of the betting exchange's more traditional rivals have now upped sticks and left for sunnier offshore climes (principally Gibraltar). And it's not hard to see why: by doing this there's no more 20 per cent "gross profits tax" on betting over and above corporation tax and other levies. Nor is there any need to pony up 10 per cent of your profits on horseracing for the racing industry to spend more or less as it sees fit.

Of course, one of the reasons for Betfair remaining onshore is that it remains a controversial company, one that has many enemies. Staying onshore allows it to play the good guy, no bad thing for a business with ambitions to expand into overseas territories with nervous politicians and tightly regulated gambling markets.

But there must come a point where the benefits of being virtually the only onshore internet gambling company of note no longer add up. And you couldn't blame Betfair for departing when that time comes. Just as you can't blame Ladbrokes and William Hill for having made the move. They are, after all, commercial entities. The latter two had, in fact, planned to relocate their telephone and internet betting operations offshore several years ago, not least because they were losing out badly to the likes of Victor Chandler, whose relocation to Gibraltar meant that his punters could place bets over the phone (and the interent) free of the hated betting duty.

Gordon Brown persuaded them to stay put by replacing betting duty with the gross profits tax, stimulating a betting boom and a multimillion-pound tax windfall. A windfall which would be rather useful right now. Trouble is, plenty of bookies (including Victor) stayed put, giving them a huge financial advantage over their onshore rivals. Staying onshore became untenable.

It is not as if the Treasury wasn't warned about this. Unfortunately the last government chose not to listen. And the current government (which will have heard from the same lobbyists while in opposition) also chose not to listen.

As someone who enjoys the occasional flutter, the betting industry's move offshore is great news: I stand to benefit from better prices, and more promotions.

As a taxpayer I'm inclined to ask why successive governments have sat back and allowed millions of pounds in revenue to disappear,. particularly when the Government says it is so hard up that it has to axe child benefit for everyone earning over £45,000.

There are ways for the Government to get some of the lost money back. Gambling is a regulated industry: it would be possible, for example, to require those who offer, and crucially, advertise gambling services to operate and be taxed onshore. Cue howls of outrage from the gambling industry. But, George Osborne, who do you want to bear the pain of deficit reduction? Punters or parents?