GBGA Targets Tax Hikes in Latest UK Gambling Act Challenge

October 23rd, 2014 | by Kaycee James

London’s High Court rejected the first GBGA challenge to the UK Gambling Act earlier this month; now the GBGA has filed a second complaint. (Image: Alamy))

The Gibraltar Betting and Gaming Association (GBGA) may have failed in its first attempt to challenge the UK’s Gambling (Licensing and Advertising) Act, but that doesn’t mean the group is done trying to undo the law quite yet.

The GBGA is now filing a second challenge to the licensing regime, this time targeting the 15 percent point of consumption tax that is one of the most significant changes under the new law.

The idea behind the tax is that it will be levied based on where the gambler is located, rather than where the operator is based. That means that the UK will be able to charge a 15 percent tax on profits from licensed sites that are made off of any UK gambler.

But the GBGA is now saying that this tax is illegal under European law, as it violates Article 56 of the Treaty on the Functioning of the European Union (TFEU). They argue that such a tax is essentially a restriction to the free movement of services.

GBGA Says Tax Meant to Restrict Operators

“That restriction cannot be justified under Article 52 TFEU, since the new tax regime has been introduced in pursuit of an illegitimate aim,” GBGA lawyers said in their filing. “The main aim of the new tax regime is to discourage remote gambling operators from moving to foreign jurisdictions and offering their services to UK consumers from those jurisdictions.”

Regulators in the UK would likely argue that the new tax is more about ensuring they can collect revenue from iGaming that takes place within their jurisdiction. But the GBGA has made a number of arguments designed to show that the taxation policy is discriminatory and should be struck down.

“The Government says this tax ensures ‘respect for fiscal sovereignty’ and is essential for the ‘coherence of UK tax authority’,” the GBGA said in its filing. “We believe this means their real aim is to ensure that UK operators in this market are favoured, at the expense of law-abiding and responsible operators outside of the UK.”

Several Angles of Attack

The GBGA challenge also cites Article 56 of TEFU, which establishes “freedom of establishment and freedom to provide services.” In particular, it mentions that in the previous High Court ruling from Justice Green that found that simply raising revenues alone wasn’t a justification for the tax.

In addition, the group has also suggested that the tax is discriminatory in multiple ways. For instance, they say that many foreign operators who choose to abide by the law would then face double taxation, as they may also be taxed in the jurisdiction where they are based. This would put them at a competitive disadvantage against rogue operators. They also point out that the tax doesn’t apply to all gambling organizations, such as “spread betting organizations.”

The GBGA’s first legal challenge to the new UK licensing program was roundly rejected by High Court justices earlier this month, though it did effectively push back the implementation date of the legislation by a month while the court ruled on the issue. Operators who want to take bets from UK customers will now need to be in the process of obtaining a license by November 1, with the point of consumption tax expected to be implemented starting on December 1.

The law has been of particular interest to poker players, as many operators have had to shift their operations in response to the law. Some sites have left gray market jurisdictions, perhaps in reaction to aspects of the law that require justification for offering real money play in areas where they do not hold licenses. Others, like PokerStars, have said that VIP rewards will be reduced slightly to account for the new taxation policy.