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Offshoring to Avoid Taxes: It Works

The Independent reports that U.K. bookmakers and casinos have escaped paying around £1 billion in taxes over the last three years by routing their operations through subsidiaries offshore.

The newspaper estimates they are saving around £250 million a year by locating their online and phone betting operations overseas in Gibraltar, Alderney, the Isle of Man and Guernsey.

The offshoring, which has grown in recent years, allows operators to replace the U.K. gambling duty of 15 percent of gross revenue with effective rates generally less than 1 percent. Every one of the 10 largest operators in remote and online gambling does business this way, the newspaper found.

The government currently is studying a new levy centered on “point of consumption”—taxing bets where they are placed—rather than where they are taken (“point of supply”), with the intention of introducing the change in December 2014.

To counter growing foreign competition from gaming sites headquartered in Gibraltar and Malta, in 2001 then-Chancellor Gordon Brown replaced the 6.75 percent tax on bets to 15 percent of GGR. The move was designed to induce operators to return to the country, but was undercut by rivals based in tax havens, particularly those operating casino sites. In 2009, William Hill, Ladbrokes and SkyBet moved their online and phone businesses offshore. An exodus of the largest operators followed.

Only two major U.K. operators—Bet365, a family company based in Stoke-on-Trent, and Sky—pay U.K. duty on sports betting. Their casino games, however, are located in Gibraltar and Alderney.

 

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