08 October 2006


    The Sunday Times – Business

    The Sunday Times October 08, 2006
    By Dipesh Gadher and Matthew Goodman

    PLANS to turn Britain into a “world leader” in internet gambling have been drawn up by ministers, according to internal Whitehall documents.

    In stark contrast to America, where online gambling has in effect been outlawed, ministers want to attract offshore companies to Britain.

    New legislation will lift the current ban on online gaming businesses in Britain from next year. But documents obtained under the Freedom of Information Act reveal that a government charm offensive is well under way. They show that the Department for Culture, Media and Sport (DCMS), has lobbied the Treasury on behalf of online betting and gaming firms to introduce a favourable tax regime.

    Over the past two years, ministers and officials at the department have met representatives of the internet gambling industry on 26 occasions.

    In July, Richard Caborn, the minister in charge of gambling, travelled at taxpayers’ expense to Gibraltar, the headquarters of Party Gaming and 888.com. At the end of the month, Tessa Jowell, the culture secretary, will host an international summit of politicians at Ascot racecourse to discuss regulatory standards.

    Officials from the United Nations, the European Commission and the major credit card companies have been invited.

    The government’s desire to take the lead in the online gambling sector is spelt out in a briefing note written for Caborn before a meeting in July last year with Mark Davies, managing director of Betfair, the online betting exchange.

    The note says: “It is government-wide policy, and that includes HMT (Her Majesty’s Treasury), that Britain should become a world leader in the field of online gambling, in order to provide our citizens with the opportunity to gambling (sic) in a safe, well-regulated environment.”

    The meeting took place as the Treasury was deciding a new tax regime for online betting exchanges, which are already allowed to operate onshore. Although bookmakers, such as Ladbrokes and William Hill, were arguing that online companies should pay higher rates of tax, Davies told Caborn such a move would “kill” Betfair.

    Six months later, the chancellor announced a 15% tax on gross profits for online operators — the same regime that applies to traditional bookmakers. The move apparently “delighted” Betfair, according to another DCMS document.

    Documents released by the Treasury under the Freedom of Information Act showed officials are considering ways to attract betting firms.

    Briefing notes for one speech said: “The industry needs clarity on taxation issues, as this is a crucial factor shaping investment and location decisions, especially for remote operators.”

    Luring online poker and casino firms into Britain may prove difficult. The industry has told Caborn that anything more than a 2% tax on gross profits would be unacceptable. Some companies have asked the government to consider a system of “secondary” licensing, which would give them the British regulatory “stamp of approval” while retaining the tax benefits of remaining offshore.
    # Sportingbet, whose shares fell 64% last Monday in the wake of the new American law, has received takeover approaches for its US business.

    The company has commissioned legal opinions to determine the impact of the American legislation.

    The firm has been contacted by several people wanting to buy its US operations, although a sale is not the only option being considered.


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