How would an isolated Gibraltar impact the UK betting industry?

Amid years of legal back-and-forth between the Gibraltar Betting and Gaming Association (GBGA), the European Union’s Court of Justice (CJEU) and Her Majesty’s Revenue and Customs (HMRC), not to mention the drama of BREXIT, Gibraltar’s online gaming industry has been put through the proverbial wringer.

In 2014, a law change within the Finance Act was initiated in the UK, imposing a 15% tax on gambling operators who place offshore bets for UK persons, despite the fact whether or not the operator is UK-based. In the wake of this, GBGA filed an official petition, requesting that Gibraltar be deemed a member state of the EU, distinct from the United Kingdom; the CJEU was requested to rule in the dispute. This application was part of an ongoing consumption tax dispute which has been ongoing between the GBGA and the HMRC ever since.

The GBGA, representing the various gambling service providers in Gibraltar, made the argument that the new law would result in double taxation, which was an infringement of EU law, meant to guarantee the right to “provide services across the bloc.”’Their argument proffered against the new levy that it was unfair for gambling operators based in Gibraltar to be obligated to pay UK taxes and that imposing restriction on their EU service provision was discriminatory toward non-UK gaming providers.

A year ago, Brexit’s drama added fuel to the fire. In 2017, a new judgment was issued in the CJEU, which ruled that as far as EU law is concerned, Gibraltar gaming service providers who were available to UK users are seen to delivering their services in the context of a single EU member state. The CJEU’s ruling deems that the United Kingdom and Gibraltar are to be seen as distinct and separate EU member states. Effectively, this means that the 15% tax imposed on operator within the EU or UK is still applicable to those based in Gibraltar as well. As a result, the GBGA’s legal appeal has come to a dead end.

There has long been fiery discussions surrounding the future of Gibraltar leading up to and post-Brexit scandal, with England’s decision to leave the EU being seen as a defining moment for Gibraltar’s future gambling legacy, as the impact of isolation could severely impede the profitability of gaming industry. How viable is the online gambling industry in Gibraltar post-POCT and post-Brexit? Paddy Power made the recent announcement that its Gibraltar office would be shutting down, while insisting it was not Brexit-related.

This is worrying, as online betting is vital trade for Gibraltar, accounting for approximately 25% of the British Overseas Territory’s GDP. At the end of June 2017, Albert Isola, Gibraltar’s Minister for Financial Services and Gambling, announced his plans to “modernise and consolidate” fees and levies which iGaming licensees pay in the jurisdiction, according to Gaming Intelligence. Isola revealed in his Budget Speech of 2017, his plans to meet with representatives within the gambling industry over the next few months, in his quest to evolve more consistent taxation models.