Group's online move to Gibraltar continues to excite speculation

Yesterday's announcement that the William Hill plc group is to move its online betting operations to Gibraltar (see previous InfoPowa reports) continued to excite speculation today (Wednesday) with mainstream media all commenting on the possibility of an exodus of other gambling groups seeking a more benevolent tax regime.

The Guardian newspaper reported that Britain's biggest online bookmakers are drawing up plans for a mass exodus from the country to gambling-friendly tax havens such as Gibraltar, Malta and the Isle of Man.

Other publications commented on the impact of a general move on government tax and horseracing levies, speculating that major gambling groups like Ladbrokes, Gala Coral and even government owned the Tote must be weighing their options if they wanted to remain competitive following William Hill seizing the initiative.

Ladbrokes has already commented that it would obviously have to consider the implications, although no decision has yet been reached. The company is due to release results tomorrow (Thursday) which many observers feel would be a convenient time to announce its own plans, if any, to move offshore.

The Tote, presently owned by the government, has acknowledged that its position is complicated but that it would not want to be left as the "last man standing", paying UK betting tax at 15 percent of gross profits if its rivals were paying 1.5 percent offshore.

Betfair's reaction will also be watched with interest when it releases its annual results later today (Wednesday).

More departures could be embarrassing for the government, which is already engaged in a review of the Gambling Act. The Guardian points out that bookmakers were granted significant tax breaks eight years ago in a "gentleman's agreement" under which major chains pledged to repatriate their embryonic offshore internet and telephone betting businesses and pay UK taxes on them.

A Treasury spokesman said: "We recognise that this is a commercial decision for William Hill but we are very disappointed."

William Hill chief executive Ralph Topping remained unrepentant, suggesting that technological advances had in effect left the deal unsustainable. "The people who shook hands on that deal lacked the foresight to see how the internet would develop," he told The Guardian. William Hill's telephone betting unit had lost out to offshore rivals and could be forced to close one of two British call centres, he said. "By being loyal to the UK we have seen our telephone business destroyed … We are not hanging around to see if the same will happen to online."

Yesterday (see previous InfoPowa report) the firm posted another double-digit rise in gross win from its controversial touch-screen roulette machines in betting shops for the first half of 2008.

Roulette machines were made viable for bookmakers by the 2001 Treasury pact and provided an unexpected eight-year gold rush for William Hill and others. For the first six months of the year machines accounted for 41 percent of William Hill's betting shop gross win — GBP 161 million — with their contribution to profits thought to be far greater.

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