Gambling on tax may backfire

Proposals to change the taxation of online betting companies which are based offshore could lead to 40 per cent of gamblers using unauthorised traders.

The Treasury closes its review into the £1.7bn UK remote gambling market next week, in which it is pushing for online companies to be taxed where the bet takes place rather than their physical location. Many online betting groups operate from places such as Gibraltar, where a lighter tax and regulatory regime operates.

However, a report by accountant Deloitte – commissioned by William Hill, which has more than 10 per cent of the UK online market – shows any tax burden will grow the black market: a 15 per cent tax could mean two-fifths of legitimate firms leaving the UK market.

A spokesman for William Hill said: "The question for the Government is, should it introduce policy which distorts markets?"