Betfair Sportsbook Threatens to Pull Out of United Kingdom

Posted By: Date: 10/14/2010 at 12:00 am Leave a comment

As so many online gambling operators are fighting for rights to market their products in Western Europe, its rather surprising to find that at least one major online sportsbook is actually threatening to leave the eastern-most portion of the continent. Betfair Sports is threatening to do just that, talking of pulling out of the United Kingdom due to inequality issues among operators.

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According to the online sportsbook, the company feels it is being unfairly targeted with a new tax increase proposal. There is a big difference in taxation for online sportsbooks that are headquartered in the UK, and those working from offshore locations, including a 10% levy on horse racing. Betfair is distressed by the fact that the online sportsbook forked over more than £6 million last year alone on this tax while offshore online sportsbooks are able to avoid the tax from the British Horseracing Authority (BHA).

The online sportsbook has not made any official announcements that it will or will not move, but there is a contingency plan in Betfair’s possession that points to the company’s serious consideration of moving its base of operations to Gibraltar. If Betfair feels that it cannot effectively compete in a market where many of its competitors are not subject to the same multi-million proposed tax hike, Gibraltar may in fact be the company’s best solution.

Gibraltar does not impose any levy on horseracing. Moreover, the gross profit tax is a meager 3%, while the UK charges a comparably staggering 15% GPT. Just last June, one of Betfair’s biggest competitors, William Hill, made the same move, traversing the whole of Eastern Europe to set up headquarters on the miniscule peninsula that is Gibraltar.

Prior to the formation of the UK Gambling Commission in 2005, online sportsbooks that operated from within the borders of the United Kingdom had a very strong hold on the local industry. Since then, however, more and more offshore operators are worming their way into the market.

These smaller companies have not taken the focus off UK’s major online sportsbooks, as the majority of punters continue to hold accounts with Betfair and other UK-based companies. But the profit margins, after taxes, are not respective of their productivity.

Betfair recently launched an office in Dublin, Ireland that employs around 100 staff members. Being beyond the reach of the UK’s jurisdiction, this gives the online sportsbook more flexibility as the gambling regulations continue to evolve. The UK’s generated revenue from taxation of online gambling has already dropped from £115 million to £75 million in the last three years. This may be the warning flag the jurisdiction needs to make a change before those already deflating numbers crumble completely.

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