The consequences of the UK‘s decision to hike gaming tax are expected to be felt well beyond the country’s borders, as ministers in Gibraltar have shared concern that the decision severely threatens the island’s economy.
The British overseas territory has turned into somewhat of a gaming hub for remote operators, and Nigel Feetham, Minister for Justice, Trade and Industry, sounded the alarm bells over the financial impact of the changes.
“There is no way of sugar-coating this. It is bad news. We did not ask for these measures. We lobbied strongly against them. And, frankly, there was very little more that we could have done,” he said in a ministerial statement.
“This development impacts the vital work we have undertaken over the past two years on corporate tax reform, which we have referred to as Gibraltar’s ‘National Tax Strategy’.
“The tax revenue generated helps to fund our public services, health care and education, and to strengthen our public finances – without increasing the burden on ordinary working people. This announcement, unfortunately, could put us back to where we were before then.”
From April next year, remote gaming duty will be taxed at 40 per cent, up almost double from 21%. Meanwhile, from April 2027, a new general betting duty rate for remote betting will be introduced at 25%.
In response, the industry has warned of the need for wide-scale mitigation in an attempt to offset some of the financial impact of the changes, including reductions in operational, promotional and marketing spend.
“The level of corporate tax and PAYE revenue at risk in Gibraltar will depend on the extent to which local operators are able to mitigate the increased gambling tax costs,” said Feetham.
“Raising taxes in the UK imposes higher costs on Gibraltar gaming businesses and reduces the amount ultimately paid in corporate tax in Gibraltar. If part of that mitigation involves reducing jobs, this would, in turn, have a direct impact on PAYE receipts.”
According to Feetham, the online betting and gaming sector accounts for approximately 30% of Gibraltar’s GDP, almost one-third of its tax receipts and employs more than 3,400 people.
He cited modelling that revealed the effective tax rates for some UK operators could increase to between 80% and 100% in the wake of the changes, severely threatening the financial viability of operators.
“Gambling taxes are a top-line tax charged on revenue and should not be confused with bottom-line profit,” he added.
“Tax is charged on a point of consumption basis, so legitimate UK-facing firms such as those based in Gibraltar (as opposed to the UK-facing black market) are already paying UK gambling taxes. In Gibraltar, firms already pay £750 million of gambling taxes annually to the UK Exchequer.”
Looking to the future, the priority for Gibraltar lies with cementing the island’s forthcoming gambling bill, which seeks to modernise the framework of the 2005 Gaming Act, encourage innovation and strengthen market resilience.
By doing this, said Feetham, Gibraltar can look to diversify its market exposure and reduce its reliance on the prosperity of UK operators.
He concluded: “I have been in discussion with the Gambling Commissioner on how best to grow non-UK business, both to diversify our exposure and to open new markets for Gibraltar. On Friday, I instructed the Gambling Commissioner to accelerate this work so that Gibraltar can move swiftly to capture opportunities beyond the UK and strengthen the long-term resilience of our gaming sector.”
