Online Gambling Regime Said Unfair to British Operators
Overseas gambling operators who advertise in the U.K. may face new rules, the Department for Culture, Media and Sport said Thursday. Rapid technological developments in Internet gambling, and a changing regulatory landscape, mean U.K. operators may not be getting a fair deal, it said. The Remote Gambling Association agreed, but said the exercise won’t be successful unless the government addresses its uncompetitive tax regime. Meanwhile, EU and U.S. lawmakers are pressing for an end to the long-running trade dispute over U.S. anti-gambling laws.
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The DCMS will examine a range of issues, including securing fair contributions from licensed foreign operators toward the costs of regulation, the treatment of problem gambling and the horse race betting levy, it said. The review will also look at existing controls applicable to operators licensed overseas to ensure they uphold the “rigorous” consumer protections required by U.K. law, the department said. Its findings will go to Parliament before the end of the year.
The government has given itself a “hugely difficult job,” said Remote Gambling Association Chief Executive Clive Hawkswood. The review is wide-ranging and includes “strange options” such as extending the national horserace betting levy to companies outside the U.K., he said. There are also major legal issues regarding the extraterritorial application of law and tax, not to mention that issues raised in connection with EU internal market rules such as state aid, said Hawkswood. The government should have addressed the legal issues internally first, he said.
The U.K. does not have the right balance between taxation and regulation, Hawkswood said. It’s uncompetitive because the tax burden for U.K.-based online gambling companies is 15 percent gross profits tax in addition to a 10 percent gross profits levy on horseracing, the standard value-added tax and corporation tax, he said. In some European jurisdictions, the overall tax burden can be “much less than half of that,” he said. Unless the government addresses the unfairness of its tax structure, it may “just end up fiddling at the margins of the issues,” said Hawkswood. The DCMS will meet with the RGA shortly, he said.
Lawmakers Criticize Trade Feud
Some EU and U.S. lawmakers, meanwhile, want an end to U.S. “WTO-violating Internet gambling enforcement,” they said after an April 17-19 Transatlantic Legislators’ Dialogue in Prague. Despite losing a series of decisions at the WTO, U.S. authorities continue to enforce against non-U.S. interests in the sector, including public EU-licensed and - regulated companies, said European Parliament member Erika Mann of the Socialist Group in Germany, and Reps. Steve Cohen, D-Tenn., and TLD Co-Chairman Shelley Berkley, D-Nev.
In March, the European Commission said U.S. Internet gambling laws are a trade barrier inconsistent with WTO rules, and resolution should be sought with the Obama administration (WID March 27 p1). The draft report, now under review by EU governments, found that U.S. anti-gambling measures -- and threats of criminal sanctions -- are causing serious adverse effects to the EU.
The U.S. and Europe must set a good example in complying with international obligations, Mann said. Regardless of one’s views on gambling or on the jurisdictional challenges of e-commerce, it’s dangerous to allow a precedent to be set where proven violations “can be compounded by retroactive and discriminatory application of criminal enforcement,” she said.
The situation is an “unnecessary dispute that should be avoided through sensible negotiation,” said Cohen. The priorities for the world’s two largest trading partners “lie in cooperation and a duty to uphold the integrity of the treaties we sign,” said Berkley. He’s seeking an approach more aligned with that of some EU states where Internet gambling services are licensed, regulated and the approach is focused on customer protection.
The thrust of the transatlantic discussion was that the EU is “showing some forbearance” by not immediately seeking sanctions, said Berkley Chief of Staff Richard Urey. The congresswoman has no advice on a solution, but is happy the matter is being handled through dialogue rather than legal measures, he told us.
No potential solutions came from the meeting, but both sides agreed there was a problem they want resolved, Mann said in an interview Thursday. The answer must come from Congress, she said. In a Wednesday letter not yet made public, Mann urged EC Enterprise and Industry Commissioner Gunter Verheugen to look into the situation, she said.
Whether the U.S. is any more ready to change its anti- gambling stance under the Obama administration isn’t clear, Mann said. Congressional colleagues appeared more open and understanding of the problems, but how far they can take their case isn’t known, she added. Berkley hopes the new administration is more open-minded on the issue but can’t point to any documented changes, Urey said.
Rep. Barney Frank, D-Mass., will likely introduce new Internet gambling legislation next week, his press secretary said. It will contain some differences from his 2007 bill, but those changes will be revealed closer to the filing date, he said. Berkley signed onto a measure two years ago with the same objective as Frank’s, Urey said. He wouldn’t predict whether she'll back the new one, but said the congresswoman is “very inclined” to want to support legislation to remove the trade impasse.