The tax haven of Gibraltar has emerged as something of an online gambling capital over the past decade, due to its competitive tax regime. From next year however, taxes on online gambling companies are set to increase tenfold.
By charging online companies a tax levy of only one per cent, with a maximum charge of €500,000 (£425,000) a year, the British Overseas Territory has managed to attract some of the biggest online gambling companies, including Ladbroke , Victor Chandler , and William Hill to set up offshore operations there.
From January 2011 however, the one per cent tax is set to increase to 10 per cent, as Gibraltar tries to ensure that its tax regime is in keeping with EU regulations on fair competition.
John Shepherd, a spokesman for Gibraltar-based betting firm Partygaming , said that although the new tax rate was a large jump, he did not think it would stop companies from setting up offshore operations on the island. “We’ve known about this rise for some time, and we’ve factored it in," he said. "The tax is still going to be very low.”
Although the UK represents one of the largest online gambling audiences in Europe, many companies have chosen to base themselves in jurisdictions such as Gilbraltar or Malta to take advantage of what they say are more competitive tax rates.
As the popularity - and profitability - of the online gambling sector has grown, the government has made several attempts to entice British companies to return to the UK, but to no avail.
In 2001, the government replaced the nine per cent tax on all bets with a 15 per cent tax on overall profit, but was unable to prevent William Hill and Ladbrokes from relocating to Gibraltar in 2009.
Nearly 2,000 people in Gibraltar work for the online gambling sector: an estimated 12 per cent of the territory's entire workforce.
Source: The Telegraph/Yahoo