The UK's move to a point of consumption basis for betting duty moved one step closer yesterday with the publication of the draft Gambling (Licensing and Advertising) Bill (see here).
In the Budget in March, the Chancellor announced the Government's intention to change the basis of gambling duties so that instead of applying only to British-based operators it would be payable in respect of all British customers wherever the gambling operator is located. The plan was to introduce the new basis from December 2014 but the Government also stated that the regulatory framework would be changed in parallel (see here and here). This was presumably because the current regulatory framework entitles any operators based in the EEA, Gibraltar or a "White List" territory (Alderney, Isle of Man, Antigua and Barbuda or Tasmania) to advertise to and transact with British consumers without requiring any licence from the UK Gambling Commission. Without some regulatory nexus between an offshore gambling operator and the Gambling Commission it would be difficult for the Government to enforce the point of consumption gambling duty.
The draft Bill provides this connection by requiring that all gambling operators advertising to or transacting with British consumers will be required to hold a Gambling Commission licence.
As we have previously written (see here and here), it is not permissible for raising tax revenues to be used to justify a departure from the EU Treaty principle requiring services to be freely provided throughout Europe and, if this is really the rationale for the change to the regulatory regime, operators may well be able to successfully challenge the introduction of the new legislation.
The document accompanying the draft Bill makes no mention of tax other than in a footnote which states that "Subject to HM Treasury [offshore] operators would also contribute to UK gambling tax". Instead, the rationale for the Bill is stated to be consumer protection "by ensuring that British consumers will enjoy consistent standards of protection, no matter which online gambling site they visit".
The Bill will now be subject to pre-legislative scrutiny by the Culture, Media & Sport Select Committee and the DCMS press release states that "It is hoped that the Bill will be introduced in the third session, Parliamentary time allowing". (The third session is due to end in Spring 2013). In addition, the Bill has been notified to the European Commission under Directive 98/34 (see here). This is a mandatory notification procedure for all draft legislation dealing with services provided on a commercial basis over the internet. Following notification, a standstill period of three months must be observed which means that the legislation cannot be adopted before 4 March 2013.
Any substantive amendments which are made to the Bill following the consultation period will require a further notification to the European Commission and adoption of the legislation without following this procedure renders it unenforceable. During this period other Member States and the Commission will examine the Bill and may react. The standstill period will be extended if potential issues regarding the compatibility of the Bill with EU law need to be resolved.