The Remote Gambling Association (RGA) requested a KPMG study regarding the UK Government's proposed place of consumption (POC) tax of 15% and the results are in.
The study revealed that HM Treasury's POC tax plan concerning online gambling "is likely to fail to achieve its aims unless the rate of gross profits tax is no higher than 10 percent and it makes allowances for companies to offset costs associated with bonuses and incentives."
The RGA wanted KPMG testing to include the following impacts on the online gambling market:
· consider the possible impacts of the imposition of a 15% tax; and
· recommend how an optimum percentage figure might be identified.
According to the KPMG report:
The dangers of implementing the 15% tax immediately include:
· Firms are unable to recover their costs and either go out of business or are forced to operate in the grey market; and / or
· A large number of UK customers switch to buying gambling products from offshore duty avoiding providers because they are able to offer lower priced, more attractive, products.
· If either of these come to pass, then it may be difficult to reverse these consequences with a subsequent reduction in the tax rate.
Clive Hawkswood, Chief Executive of the RGA said:
“It is vitally important that the Government does not repeat past mistakes. It needs instead to set rates of remote gaming and betting taxation that give operators a realistic chance of being competitive in what is an inherently international market.
"This is a challenging time for the industry and we will continue to engage with Treasury to ensure the impact of any tax changes is fully understood by the Government. The online gambling industry is a UK success story and already contributes significantly to UK Plc in terms of jobs, marketing spend and corporate taxes. We do not want to see the Government’s plans put these companies and their investments in jeopardy."