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Gibraltar makes immediate changes to gambling tax rate

The Gibraltar government has announced changes to its gambling taxes with immediate effect, with higher annual licence fees for operators and suppliers coupled with lower taxes for consumer facing operators

The government has been considering various models to replace the historic and essentially ‘flat rate’ gambling charges paid by its licensees since 2005.

Gibraltar chief minister Albert Isola explained in his 2018 Budget speech that the change had proved to be a “complex and challenging process” with significant interest within and beyond the industry.

“For this reason we have consulted extensively with the sector,” Isola said. “As a consequence I can inform this House that government has decided to roll out the arrangements for both new licence charges and new gambling duties with immediate effect.

“To delay implementation would mean a 12 month delay and this is not workable as the first due date for this year is 1st July.”

The Gibraltar gaming industry will now move to a charging model with substantially higher annual licence fees, approximately £100,000 for each B2C licence and £85,000 for each B2B licence. Gambling tax will only be paid by B2C licensees on their gross receipts (both gaming and betting receipts) at the “very low” rate of 0.15 per cent.

“As with any changes in tax modelling, there are ‘winners and losers’,” Isola explained. “My staff have been assiduous in ensuring those who are likely to pay substantially more have been kept abreast of developments, the reasons for the changes, and how they will impact on them.

“Whilst no industry welcomes increased charges, they have appreciated the consultation and made their own adjustments; conversely, those with likely reductions in charges have been less well informed so as not to encourage over or excessive expectations about reduced charges, and this model, which largely links charges to gross profit, will reduce the charges paid by many.”

Isola told the Speaker of the House that the new model was necessary and had been carefully developed to complement a constantly changing industry landscape.

“Ideally the transition would have been initiated at an earlier point in the year and with more information available, but that detail will be provided in days and weeks to come and I am confident we have the right model and now is the time to introduce it,” he said.

Isola pointed out that the impact of Brexit on the business community remained “difficult to predict or quantify”, and that the gaming industry continued to be a key sector of the country’s economy.

“The combination of the remote and land-based industries provides direct employment for some 3,490 individuals with the bulk of those working in the remote sector,” he said. “It is undeniable that the Gibraltar based remote gambling industry remains the most significant in Europe, if not the world, but it is now sailing into headwinds.

“These are created not only by the uncertainties of Brexit and challenges around EU market access, but also because of increased industry consolidation; as companies look to scale up, drive efficiencies and deal with increased regulatory costs in new and existing jurisdictions.”

Isola said that while Gibraltar’s two land-based casinos had also recently announced their own plans for shared operations, it was important the country retains both the Sunborn and the Admiral facilities as “an enormous amount of work and goodwill had been invested in taking this project forward.”

Gibraltar currently has 30 remote licensees, however, Isola warned that further consolidation will mean that the number of B2C licenses would again likely reduce this financial year.

“However, interest in Gibraltar as a licensing jurisdiction remains; with the Licensing team dealing regularly with pre-application enquiries and a small number of substantive applications,” he said. “Both the consumer facing B2C and B2B games supply market continue to grow in scale, if not in absolute numbers, but there has always been variation in numbers within an upward trend that has continued since 2011.”

In March the chief minister announced that the UK had guaranteed Gibraltar licensees continued access to the UK remote gambling market throughout the Brexit transition period and beyond.

“Gibraltar is the only jurisdiction to have received such an assurance,” continued Isola. “Much of the Gibraltar based industry is UK facing and some 80 per cent of UK remote betting and a very significant percentage of UK gaming is provided from Gibraltar, to what is the EU’s biggest gambling market.

“We have made it clear that Brexit provides an opportunity to strengthen our operations with the UK, and our discussions with UK Ministers and officials have demonstrated that the UK does not want to see a shift in the critical mass of remote gambling operators away from Gibraltar.”

He added that the government can “understand and will support our firms who are contingency planning and prudently assessing the political and business risks created by the nature and timing of Brexit being unresolved”.

“Looking at the issue from a traditional business risk assessment perspective, whilst the probability of a hard or early Brexit and not being able to access EU markets from Gibraltar remains low in our estimation, the impact of a such an occurrence would be high,” he said.

“That this situation could arise in the coming months, but is effectively being planned for in 2021, means early decisions have to be made that will change some operations in Gibraltar.

“That is why we are working closely with our operators, who are most immediately exposed to ‘Brexit risk’, to construct a regulatory and licensing framework that is right for them and right for Gibraltar; in terms of regulatory control and continued economic benefits for Gibraltar and all those who live or work here,” he said.

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