The Independent has opened a new angle on tax avoidance, this time concentrating on the role of online bookmakers and the costs they impose on the UK Exchequer, reporting today:
Bookmakers and casinos have avoided paying around £1bn in UK tax on bets placed by British people by routing them through subsidiaries based in overseas tax havens, The Independent can reveal.
Football, racing and poker betting operators are estimated to be saving around £250m a year by offshoring online gambling — more than the highly publicised recent cases of tax avoidance by Starbucks and Amazon.
Although William Hill and Ladbrokes are UK Plcs with hundreds of high street branches, bets placed on their websites and phone lines are regulated and taxed in the British overseas territory of Gibraltar.
Other big names such as Betfair, PaddyPower and 888 — which heavily market their games in the UK — also avoid paying British tax on "remote" betting and gaming.
It's a now familiar tale: when something goes on line it goes offshore:
The offshoring, which has grown in recent years, allows operators to replace the UK gambling duty of 15 per cent on gross profits with an effective rate of duty of less than one per cent.
An investigation by The Independent has found that all of the top 10 operators in "remote gambling" now headquarter a part or all of their operations in Gibraltar, the Isle of Man or Guernsey — at a cost to the Treasury of £1bn in lost duty since 2009.
Of course, all deny wrongdoing:
In a statement, William Hill, which saves an estimated £37m annually in betting duty, vigorously denied it was "engaged in any avoidance scheme or artificial tax structure".
Ladbrokes, which saves around £18m annually, said it had only moved offshore reluctantly "to survive and compete".
However, disclosure of the scale of the money lost to the UK Government across the entire industry is likely to provoke anger, at a time of austerity caused by a growing deficit in the public finances. Richard Murphy, director of Tax Research, said: "This indicates, yet again, the toothless approach of the UK's tax authorities to tax avoidance."
Yes, I did say that, and as the Independent then noted:
Mr Murphy added that the Treasury's approach of working in co-operation with business to secure tax agreements was "not working".
"We know it failed in the case of banking where Barclays ignored their deal with HMRC months after they signed it," he said. "Now we can see that the negotiated arrangements with the gambling industry — where they were given all the concessions they demanded — haven't worked."
In total about £300 million a year is lost as a result of this abuse. Just add it to the tax gap that H M Revenue & Customs refuses to recognise.
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There was a discussion about online betting on Radio 4 yesterday – nothing specifically about tax avoidance that I heard. It was sickening actually and I tried not to listen, but was too lazy to turn the radio off. An industry spokeswoman was saying how wonderful everything was and explained why it is that so many of these vultures are based in Gibraltar – can’t remember what she said – obviously not because it is a tax haven.
So you believe that HMRC are toothless? What exactly do you think they could do in this situation to have the gaming revenues taxed in the UK.
Let’s have a tax on a destination basis and remove the UK gaming licences of those who do not comply
The UK are currently in the process of moving to a different way of licensing on-line gambling that will ensure those taking bets from the UK need a UK license and a consequence of obtaining that license will be tax on that gambling activity.
This won’t be the end of on-line gambling in offshore locations because they will continue to appeal for numerous reasons, including regulatory ones and because they are now hubs of expertise when it comes to this kind of activity.
Expertise?
Oh please pull the other one
Yup, that was the tone of the spokeswoman referred to above.
If I wanted to set up a gambling website I would look for a place that was doing it all the time and as you point out people aren’t doing it in the UK, so it isn’t a logical place to look for expertise.
I would expect the people who do these things all the time to have the expertise.
Respectfully – get real
Gambling expertise is not offshore: the expertise is onshore, the charade is offshore
It was ever thus
Why do you scoff at the word expertise? You clearly don’t understand the nuances of the industry and the expertise of those working in it so maybe you shouldn’t be commenting on it.
What is your expertise? Knowing a bit about tax and only reporting half the truth in this blog?
Ladbrokes, Coral, William Hill and Paddy Power have thousands of retail outlets in the UK and employ thousands more people, all of which is taxed and paid to the UK Government.
Does paying tax on som activity excuse avoiding tax on other activity?
What sort of Xperia opinion is that?
I notice Corals included in one of these responses.I use lots of these sites in order to get offers, but have moved all my winnings out of those mentioned ( 4 out of the 17 I have) in the article.
Are we sure Corals also do this and are there other companies known to be up to this trick? I don’t want anything to do with such companies who earn their cash very easily.