Gambling executives are planning to spend hundreds of thousands of pounds to keep open a tax loophole estimated to cost British taxpayers £250m a year.
A £500,000 fighting fund has been established by bookmakers and casinos in Gibraltar to fight the Coalition’s introduction of a 15 per cent duty on bets placed online in Britain.
Under the auspices of the Gibraltar Betting and Gaming Association, they have warned the UK government that if it proceeds with the reform, they will mount a challenge under EU law.
The move is part of a tug of war over the £2 billion annual ‘house win’ from remote betting on horseracing, football and the casino games of roulette, poker, and blackjack.
The 10 biggest online betting operators in the UK locate all or part of the booming business in the tax havens of Gibraltar, the Isle of Man and Guernsey.
An Independent investigation suggests that since the offshoring intensified four years ago it has cost the UK taxpayer £1bn, far more than the highly publicised tax avoidance by the US firms Starbucks and Amazon.
From December 2014, the Coalition Government intends to change the levying of betting duty from where bets are processed to the ‘point of consumption’ - in other words, where they are laid.
Any company that tried to dodge the duty by refusing to apply for a licence from the Gambling Commission could see its website or advertising blocked in the UK.
There is intense opposition to the move in Gibraltar, a British overseas territory which has become an international gambling hub by levying duty of under 1 per cent.
Since 2009 William Hill, Ladbrokes and Betfair have all moved their online sports betting arms to the Rock, and gambling now employs 4,000 people on the two square mile territory, one in eight Gibraltarians, and contributes 15 per cent of government revenues.
Bookmakers -who pay UK corporation tax on their high street branches - have mounted a determined two-year campaign against a ‘point of consumption’ tax, including a behind-the-scenes lobbying operation. Representatives of William Hill and its smaller competitor Ladbrokes met the Tourism Minister John Penrose four times each in the year to July 2011 before the Government announced its plans in the House of Commons.
However the main focus of the industry’s campaign appears to have shifted to the law courts.
William Hill –estimated to save £37m a year in UK tax through offshoring - warned the Commons last week that the duty was “ill conceived” and “will lead to a strong and sustained legal challenge.” The company, Britain’s biggest bookmaker, told a cross-party committee of MPs that a ‘point of consumption’ tax should be no more than 5 per cent.
The Gibraltar Betting and Gaming Association (GBGA), whose members include the Rock’s major betting firms, has raised a legal fighting fund of £500,000 to “institute judicial review proceedings to challenge these measures.”
Two QCs are thought to be preparing a legal challenge.
In a submission to the Commons Culture, Media and Sport Committee, published at the end of last week, the GBGA said: "In the event that the Government determines to proceed with the proposed legislation and fiscal reforms, the GBGA will regrettably have little alternative but to institute judicial review proceedings to challenge these measures."
Britain’s plans breach European Union law because they would offer an unfair advantage to gambling companies physically located in the UK, the industry body said.
It added that the law would also have a "profound negative impact on the economy of Gibraltar" because it would force many operators to relocate to the UK instead.
Bookmakers have warned they need to base their online businesses overseas to avoid being undercut by foreign rivals and accuse the Treasury of failing to heed their warnings that they would leave the UK because of the rate of general betting duty.
William Hill declined to comment on the legal moves last night, but told the Independent last week: “The UK Government is likely to be in breach of fundamental EU principles of freedom of establishment and free movement of services leaving itself open to legal challenge.
“The current proposals do nothing to help stimulate or create a climate for investment and growth, in a sector which is a British success story and one that we should all be proud of.”