In September last year, the introduction of the UK´s Gambling (Licensing and Advertising) Act was delayed for a month when the Gibraltar Betting and Gambling Association (GBGA) launched a legal challenge against the Act´s
illegitimate, disproportionate and discriminatory interference with the right to free movement of services guaranteed by Article 56 [of the] Treaty of the Functioning of the European Union.
The Association´s challenge was unsuccessful on that occasion, but in December the GBGA won the right for a second judicial review of the Act to be conducted – this time focusing solely on the 15% Point of Consumption tax charged on remote operators. The GBGA claimed that the Point of Consumption tax restricted the freedom to provide services between member states of the EU on purely economic grounds.
The GBGA also alleged that the 15% tax would increase charges to players (via rake and fees) and reduce the benefits available to them. This could, the GBGA claimed, incentivise players to use non-licensed sites that could afford to offer more lucrative benefits and abandon the sites of GBGA members (the GBGA represents the interests of 888Poker, Bet365 Poker, Party Poker and the Ongame Network among others).
Judge Agrees with GBGA´s Arguments
Hearing the judicial appeal, Mr Justice Charles found in favour of the GBGA and said that the Point of Consumption tax raised issues of European law that should be decided by the EU Court of Justice. He was particularly concerned about the
free movement issue, which the judge said was of
Mr Justice Charles also found that the argument forwarded by HM Revenue and Customs – that it was necessary for a discriminatory tax to be applied – had no clear precedent in European law, and he questioned that the tax regime introduced by the Act was legitimate. He said that the aims of the UK Government to address a perceived competitive for overseas operators had yet to be proven.
What the judge was referring to in his last statement was that the original aims of the Gambling (Licensing and Advertising) Act was to raise tax revenues by enforcing a tax on UK-based operators. This tax was extended to include
remote operators (overseas operators providing a service to UK customers) so that UK-based gambling providers were not at a disadvantage.
The Implications of the Decision
Although it is too early to determine how the EU Court of Justice will rule on the case, should the GBGA´s appeal be upheld, there would be serious implications for the UK Government. This would include the repayment of all the Point of Consumption taxes collected to date – estimated to be in the hundreds of millions of pounds.
A spokesperson for HM Revenue and Customs said he was confident that the Point of Consumption tax would still be in place after the EU Court of Justice hearing – saying that Mr Justice Charles had not found against
any aspects of the UK gambling tax regime. However, Peter Howitt – CEO of the Gibraltar Betting and Gambling Association – said it is
quite correct that [the case] should be determined by the European Court rather than within the country that has created this unfair position.