It's a little ironic that as the UK demands fair treatment for Gibraltar from Spain it has had to itself declare war on Gibraltar as the centre of the offshore gambling industry that costs the UK hundreds of millions in lost tax revenue each year. A UK government announcement yesterday said:
New proposals for rules and sanctions to ensure that remote gambling operators with UK customers will pay UK gambling taxes from next year, no matter where in the world they are based, have been set out by the government.
The changes, which are due to come into force on December 1 2014, will mean that all remote gambling companies will be taxed on their gambling profits from UK customers.
Currently, remote gambling operators can, and do, avoid UK taxes by basing themselves offshore. The new rules will create a level playing field across the industry.
The new rules will be supported by tough enforcement measures, including the creation of new criminal offences. Failure to comply with them could result in prison sentences of up to seven years, unlimited fines, or the loss of a remote gambling operator's licence to operate.
This follows last year's announcement that the government would move to taxing gambling on a ‘place of consumption', rather than on a ‘place of supply' basis, so that all remote gambling by UK customers, generally carried out online or on the telephone, will be taxed in the UK.
So let's summarise what this means.
First, Gibraltar is a harmful tax haven.
Second, it appears sanctions on tax havens can be taken.
Third, this can be done despite the threat of EU pro-market policies. The EU has realised that without tax being paid there is no market is what I think we can safely read into that.
Fourth, if we can put a consumption basis on a tax on gambling we could do the same for, say, internet advertising. Google please note.
Fifth, we can use the threat of fines on UK based executives to ensure compliance. Many companies, and their advisers, please note.
Sixth, this can be done because the environment in which the political will to do so has been created as a result of the work of civil society. The pressure needs to be maintained.
But most importantly of all: shall we stop this pretence once and for all that UK tax havens benefit Britain? They clearly don't. In that case wouldn't the obvious thing to do be to stop Gibraltar passing such laws, as is the UK's right? Then we wouldn't be imposing the tax loss on others as well as the UK and if that were done others might think the UK serious about tackling this issue.
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The phrase ‘unlimited fines’ is what leaps out at me. I suspect this will turn into an exercise not in stopping criminal activity but in profiting from it by turning it into an income stream. This is like licensing tax havens, her Majesty’s tax havens at that. It won’t solve the problem any more than fining banksters, people who can create money, does to stop crimes in banking.
Such fines are never imposed, I am afraid
The move to taxation at place of consumption sets a useful precedent for generally tackling multinational tax abuse. Coincidentally, there was an opinion piece in a computer magazine I read yesterday, suggesting Amazon ought to be taxed on where the customer clicks to complete the sale; much the same principle.
For Internet based sales this works
Generally the outcome would be disastrous
“Generally the outcome would be disastrous”
Why? I thought you wanted multinationals to be taxed where they operate? Now I’m confused…
But let’s stop for a moment and consider the impact on developing countries with big exports
How would they collect the tax from companies that is vital to them?
One stop solutions won’t work
Also how do you track that and be guaranteed it’s being picked up correctly?
If I do that through my work computer it’s likely to register as being done in Germany becasue we link in via somewhere in Germany (that’s as techincial as I get)- So if I try to look at youtube from work for example it registers me as being in Germany and blocks certain content. And it’s celar otehr sites resgister me as logging in from germany becasue certain content is blocked and/or I get German adverts.
I am sure there ought to be technical solution to that but just pointing out it might not be plain sailing trying to implement and get it right.
Isn’t this already achieved for online sales in the US where the tax is applied state by state where the clicks take place?
Wonder what this means for Paddy Power in the UK? They are one of the biggest, if not the biggest of the online “players” – excuse the misuse… They are registered ‘off shore’ maybe in Ireland, or more likely in Bermuda via Ireland the Netherlands and several other drop off zones.