The government’s online gambling legislation will backfire

The Treasury hopes for a tax windfall, but it won’t be as simple as they are expecting it to be.

People don’t like gambling, of that there is no doubt. It is hardly a badly-kept secret that people view betting with disdain. Reader, you know what I mean. That visceral judgement you see people pass on you when they know that you gamble and it’s not something which passes their bien pesant morality. It seems like little ever changes, really. This is, despite the fact that, it is more than fifty years since Britain legalised bookmakers and casinos, and yet, it remains a taboo.

Today, the moral panic that surrounds the gambling industry is mainly focused on internet gambling, and to conquer this, the British government this year have rushed through some very restrictive legislation. Unsurprisingly, like most reactionary legislation, it simply won’t work. On that – I’ll bet you.

To begin, in-case you haven’t been following it, here’s some background on what is coming in later this year. First, on October 1^st, the Gambling (Licencing and Advertising) Act will come into play, and in December, a Point of Consumption Tax (15p tax) will also come in, too. The Act means that all online gambling companies will be required to obtain a British licence. As it stands, many online betting companies are licenced abroad. By forcing them to relocate their bases back to Britain, this is likely to create far more trouble in the market than the British government realises. The 15p Tax, moreover, is likely to also have a detrimental effect. As it stands, gambling companies are taxed on their profits in the country that they are based. The British government have decided they want a great chunk of this money, and have decided to start taxing on where the bets and wagers are actually placed by their customers.

Indeed, while the Treasury lick their lips anticipating a cash windfall from these changes in law, what they have failed to realise is that it will simply send players to foreign sites – who will, subsequently, be able to offer better odds. These sites will be far less regulated than any sites available legally in Britain today. And, such sites will not be paying any tax to the British government. Thus, the very opposite of what the government are hoping to happen, will actually happen – tax revenue may very well drop, not sky-rocket.

Just look at what has happened in Spain and France. Here, such countries decided to completely regulate the online poker industry.  Not only did both countries not experience the tax windfall that they were expecting, but their legislation also drove players onto unregulated sites abroad, many of which were illegal gambling sites. Smart move, eh? Isn’t it nice to see the British government so casually disregard the empirical evidence that suggests their legislation is, well, utterly crap?

Now in Spain nearly half of their online poker players (43%) play on unregulated sites, and approximately 12.8% admitted to play exclusively on dot-es website, which are utterly illegal.  In France, the figures are even higher, with 47% of poker players playing on unregulated sites.

Moreover, the government – which is normally so ready to obey the EU (when it says, what they want to hear, obviously) – are now also disobeying EU rules with this legislation. Indeed, under Rule 56 of the Treaty on the Functioning of the European Union, it states that firms must have the ability to conduct their business in Europe. This legislation goes completely against this notion.

So, there you have it. Our government are ignoring all the empirical evidence against their legislation from the rest of Europe. They are, furthermore, tearing up the EU rulebook, which they spend so much time normally defending when it suits them, obviously. And now, we are likely to see an even less-regulated market, and those companies that run illegally or abroad with no regulation, are going to be licking their lips. Moral panics, eh?