Fresh hope to overturn UK gaming tax after first court bid fails

Gibraltar’s “premier division” e-gaming community is taking a last roll of the dice in its bid to thwart UK plans to introduce a point- of-consumption tax for on-line bets from December by seeking a second Judicial Review.

A High Court challenge in October to halt UK remote gambling licensing was dismissed when it was found that the Gibraltar Betting and Gaming Association (GBGA) had “not established that the new regime is unlawful under EU law or domestic law”.

In the Administrative Court Mr Justice Green, added: “It is neither disproportionate, nor discriminatory, nor is it irrational”, as had been claimed by the GBGA.

However, he also concluded that Gibraltar is not to be treated as the same Member State as the UK and it is this aspect that has prompted the bid for a fresh Judicial Review, this time on the discriminatory effect of the new tax as it impacts on the provision of services between EU member states – a matter the GBGA regards as “of unparalleled constitutional importance”.

The hope is that a judge will be appointed to examine the validity of the claim and potential for Judicial Review – the stage at which the first JR bid failed – by November and, if supported, that there will be a full High Court hearing expedited before the new tax comes into effect on 1st December 2014.

Concern at the UK’s actions are not just rooted in the financial implications, given that the gaming sector accounts for a quarter of Gibraltar’s economy.

There have been claims that some companies may desert Gibraltar so as to avoid paying double taxation in both UK and Gibraltar jurisdictions. That potentially affects The Rock’s income from income, corporation and gaming tax and puts operators at a commercial disadvantage not just to UK operators, but particularly to rogue operators elsewhere over which the UK Gambling Commission has no jurisdiction and will be unable to enforce its regulations.

The effect of all that, it is argued, is also to weaken consumer protection. It could mean that “responsible foreign operators are forced to raise prices” [ie. offer less favourable odds or a high rake] says the GBGA, encouraging many consumers to move to companies with no regulation and lower overheads and where they “will face increased risks of fraud, non-payment and abuse”.

The GBGA case also maintains that the tax is a restriction on the provision of services between EU member states and there are “no equivalent precedents of the UK Government seeking to tax entities abroad in respect of the provision of services into the UK without going through the appropriate route of seeking harmonization through the EU”.

Again Mr Justice Green’s finding is encouraging. He pointed out: “Case law also establishes that measures restricting the freedom to provide services between Member States may not be justified on purely economic grounds”. He maintained that “a restriction designed to raise tax would be an economic objective and, as such, inadmissible as a justification.”