Offshore betting rule may sink UK gaming

The Government’s position was strengthened last week when the Court of Appeal ruled that advertising offshore betting in the UK is illegal, and overturned an earlier High Court decision which allowed offshore bookmaker Victor Chandler International to advertise through electronic media such as Teletext.

The Government’s determination to clamp down on offshore online betting is threatening the future of the UK gaming industry. It is adamant about protecting the lucrative revenue – £490m last year – it generates from the 6.75 per cent general betting duty. But events are threatening to bypass its stand.

Opposition to tax-free gaming on the Internet is nothing new. Last September, former Camelot director Tim Holley issued a stark warning to the Government to take a fresh look at UK gaming legislation or face a threat to the tax income stream.

Holley believes that if online gaming – set up in other countries – takes hold, the money raised for Good Causes by the National Lottery and the tax the Government makes on the sale of each ticket will be sacrificed.

The Victor Chandler case reiterates the need for clearer legislation on all online tax-free gambling, including ad guidelines.

As several online bookmakers are already operational – offering a tax-free betting service – UK bookmakers know they must offer the same to keep their customers. Without ads, attracting new consumers becomes difficult.

Victor Chandler, which was set up at race courses in the Thirties, was the first UK betting company to move onto the Net. The company is now based in Gibraltar, luring consumers who do not want to pay the hefty 6.75 per cent tax.

The company says it will now appeal to the House of Lords to get the latest ruling overturned. If that fails, it faces the possibility that its online brand will fade into the obscurity of cyberspace as increased competition comes online.

Other UK bookmakers, such as Coral and William Hill, are not openly backing Victor Chandler’s cause, allowing it to do the leg-work. However, most admit they are “keeping an eye” on the outcome.

“Chandler has always been seen as the punter’s friend,” says a company spokesman. “This is a David versus Goliath situation, and the others are exercising caution.”

Other UK-based betting companies were not far behind in setting up online services. Last December, Coral bought the already established Eurobet. It launched its tax-paid UK Website this week.

Last Friday, Eurobet, which includes the Coral name in its logo, announced it had agreed a deal with Manchester United to make it the football club’s exclusive online betting partner. A hot link will connect Eurobet to Man United’s official club Website.

Eurobet has also agreed a two-year sponsorship deal with the Arrows Formula 1 team, which Coral hopes will give the Eurobet brand a global profile.

Victor Chandler refuses to say whether it is planning a similar strategy, but the company believes it should have the right to advertise in order to raise consumer awareness that it is a trustworthy betting operation.

The UK legislation banning the promotion of offshore betting is one of the toughest in the world and out of synch with Tony Blair’s commitment to push UK companies to the forefront of e-commerce.

The industry is now calling on Chancellor Gordon Brown to lower the betting duty from 6.75 per cent to three per cent in this month’s Budget.

“This is something already explored in Ireland. It has cut the tax from ten per cent to five, and the turnover is up by 30 per cent,” says William Hill spokesman Graham Sharpe.

But the industry fears the Chancellor may in fact be planning to get tougher to stem the proliferation of tax-free betting through the Net.

Rather than plugging loopholes, the industry believes the Government should be doing more to stop considerable tax revenue seeping out of the country.

The major players say that unless Labour cuts the tax or develops a coherent strategy for technological developments in gaming, the shock waves will be felt not just by the bookies but the new Lottery operator.