UK Government cracks down on offshore gaming companies

taxes in gold letters

The UK government announced that it plans on introducing a new tax of 15% on the gross profits made by those companies who serve British clients. The new law will start producing effects one year from now, with the government setting the deadline for December 2014 and expecting a hike in revenue of £300 million each year.

The news took the gaming community by surprise, but while players took notice of this announcement and resumed their regular activities, targeted companies are worried. Many of those who might have to pay a 15% tax are located in Gibraltar and other BritishOverseasTerritories and until recently they only had to pay a tax of 1%. Add to this the fact that the fixed odds betting taxes could not exceed £425,000, it comes as no surprise that paying hundreds of times more is enough to affect their profit margin.

Some gaming companies who are on an uptrend and had their expectations exceeded by gross profits in 2012, are frustrated by the prospect of paying increasingly more. At the opposite end of the spectrum, are those online ventures that saw their profits declining last year and are worried by the possibility of giving away more money through taxes. The government on the other hand is clearly unimpressed by their financial struggles or concerns, and is determined to push forward with this set of measures.

Sajid Javid who acts as the Economic Secretary to the Treasury told the media that the new tax is not unfair and will simply put these offshore companies in line with those who have their headquarters in the UK. The official thinks that it’s been too long since these ventures have evaded taxes, despite having many UK customers and this new tax will increase the contribution they make to the public finances.

Those who have vested interest in this case and people who paid attention to former UK government announcements, are hardly surprised by the decision. The British authorities can expect a legal challenge from these online gambling companies, as it is most unlikely the gambling industry will accept the new taxes without a fight. Nevertheless, the stakes are as high as they get, and if the new tax can lead to more than £300 million being added to the budget each year, the UK government will not relent.