Did the UK Hang Itself Out to Dry?

by Lou on March 29, 2007

Is the UK about to shoot itself in the foot?
Everyone was set for an influx of online gaming operators into a regulated and controlled UK environment.
The UK was poised to become a model for how online gaming could be done right, while seizing control of the market, or most of it, in the process. Firms located offshore, including those situated in other European Union jurisdictions, were thought to be just a boat ride away from setting up shop in London or thereabouts.
But that possibility is vanishing like a herd of horses over the hill following the establishment of a 15 percent rate as the new remote gaming tax. This rate was announced just a few days ago in Chancellor Gordon Brown’s budget statement, to the dismay and shock of those in the gaming industry.
The new tax rate is set at the same level as the gross profits tax on UK bookmaking operations. Industry watchers were hoping, and had predicted, a much lower rate.
According to those close to the industry, a rate this high is likely to deal a fatal blow to any real hopes that the UK will become the center of the remote gaming universe.
John Coates, chairman of the Remote Gaming Association (RGA), said “This is a golden opportunity missed. Setting rates at an appropriate level could have attracted offshore remote gaming operators to the UK. This short-sighted decision may even force existing UK remote gaming businesses to relocate offshore to remain competitive.”
Online operators were not the only ones left disappointed by the budget. UK casino operators saw gaming duty raised to 15 percent also, while a new rate of 50 percent has been introduced for higher revenue casinos.
According to industry insiders, this tax rate was established without consulting the industry, and is almost certain to have a negative impact on profit performance throughout the sector.
Does the right foot know where the left foot is going?
It looks like a big failure to communicate. With the UK poised to get into the online gaming business in a big way, this action puts the kibosh on it. It’s difficult to see any firms eager to establish a presence in the UK under these conditions. Sure, it’s a properly regulated environment, with safety and checks and balances built into a system that only a stable government can offer, but the price is so high that it will render uncompetitive any online site locating in the UK.

While it’s usually better to be safe than sorry, this resembles a situation where firms locating in the UK would be choosing to be sorry over safe — and I don’t think that option is going to fly.

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