Tuesday, 7 February 2012
On 5 January, Deloitte published a study that claimed that the number of people who bet on unregulated websites will increase if the UK Government goes ahead with its planned regulation of offshore operators.
The Report, which Deloitte had carried out for (and which was paid by) betting giant William Hill, concluded that if the UK changes its remote licensing regime (by taxing betting operators on the basis of where bets are placed), online gamblers are likely to turn to unregulated, untaxed markets. 'Placing a 10% 'point of consumption' (POC) tax rate on remote gambling could result in up to 27% of online consumer bets being placed in unregulated markets unless effective enforcement measures are found that restrict the growth of that market', the Report read. It also claimed that if the POC tax level is set at 15% (the current tax rate for UK-based online operators), 'as many as 40% of punters could turn to unregulated markets'. Finally, the Report warned, this could result in 'the UK online betting market getting smaller because it would likely lead to smaller companies exiting the market and others cutting back on their marketing expenditure'.
Although the Report was commissioned by William Hill and its final conclusions clearly expose a political agenda, the study does highlight some reasonable issues. Under the current Gambling Act 2005, non-UK based businesses have to be licensed in so-called 'white-listed' jurisdictions in order to offer online gambling services to UK customers. 'White listed' jurisdictions are licensing regimes recognised by the Gambling Commission.
However, since John Penrose, the Minister responsible for gambling activities in the UK, announced in July 2011 his plans to introduce a licensing regime for offshore operators, and Justine Greening, Economic Secretary to the Treasury, proclaimed she would introduce a POC tax on remote gambling transactions, they have not made any mention of how they were planning to keep unlicensed offshore operators out of the British market. However, if the current UK Government does give the green light for such a new offshore licensing regime, one that includes a POC tax, it will undoubtedly encourage UK players to try their luck on unlicensed websites. Therefore, it is about time Penrose and Greening addressed some important practical issues. Both Ministers have, so far, not spoken of any enforcement mechanisms in order to limit the ability of non-licensed offshore operators to target the British market. Other countries, such as France and Spain, have introduced effective enforcement measures, such as website blocking, prohibiting banks processing certain offshore payments, bringing criminal charges against directors of unlicensed operators and banning advertising activities. None of these measures have even been mentioned by British lawmakers.
If the UK government wants to make a serious attempt to regulate offshore players, they should start thinking about the practical considerations. Those challenges should not be taken too lightly. The extent to which a grey market emerges depends on the effectiveness of the enforcement regime. And, so far, we have not seen any proposals that deal with these issues.
Michiel Willems © 2012 CP Publishing Ltd. London, UK. Picture: gamblingkingz.com