The Gaming industry faces a raft of tax increases following the announcement of the 2007 Budget. Deloitte outline the key changes to betting and gaming taxes.
Remote Gaming Duty:
Rate announced – 15 % of gross profits.
Commenting on the change, Karen Potts, Betting & Gaming Tax Partner at Deloitte said: "There was a hope and expectation that the Remote Gaming Duty (RGD) would be lower than 15%. The tax rate alone will never be enough to encourage online gaming operators onshore but at this rate it will be a disincentive and is unlikely to encourage operators to operate from the UK and apply for a Remote Operating Licence. For an online business to be attracted into the UK regulatory regime, the rate would probably have to have been less than 3%."
Revised Gaming Duty for UK operators:
Impacted: all bricks and mortar casino operators
The current Gaming Duty is based on a sliding scale between two and a half percent and 40%, with an overall average rate of approximately 20% duty. However, in the Budget, the lower rate has been abolished, the 12.5% rate increases to 15% and a new top rate of 50% has been introduced.
Commenting on the change, Karen Potts said: "Casino operators are likely to be very disappointed by this announcement. Whilst a revised scale of duty was widely expected, many operators expected duty to be lowered rather than raised ahead of the casino licence bidding process. The new scale is likely to increase gaming duty by nearly 25% and will hit all existing casino operators as well as those considering bidding for the new casino licences.
"This change may make it less attractive for operators to bid for casino licences and we could well see a reduction in the number of companies bidding for the small, large and regional casino licences. A key part of the casino licence bidding process will be to demonstrate the value that any casino will deliver to a local area. If operators are paying up to 50% Gaming Duty then there is less money for investment in local regeneration – a key element of the bid process."
VAT on peer-to-peer gaming:
Games impacted: online poker, online bingo
There is currently a discrepancy between the treatment of certain types of income when it is received by a Remote Gaming Operator, as opposed to a traditional casino or bingo operator. Bricks and mortar operators typically pay VAT at the standard rate on participation fees, and whilst remote gaming sites also make charges for participating in gaming, the remote gaming participation charges are not subject to UK VAT.
Commenting on the changes, Michael Camburn, VAT Director at Deloitte said: "The good news for the remote gaming industry is that the Chancellor has confirmed that they will continue to be exempt from VAT on these charges – something that had been causing the industry a great deal of concern when it was announced it was to be reviewed at the beginning of 2007.
"The Bingo industry will be less happy. There will be no changes to the way in which bingo is taxed in the UK, despite the Chancellor having come under heavy lobbying prior to the Budget. The exemption for small stakes and fund raising bingo will remain, however there is no extension of this relief to ‘mainstage’ or commercial bingo."
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