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I suspect reams will be written in the coming months about the Place of Consumption tax which the government intends to bring in from 1st December 2014. The objective is clear; the rate is up for grabs (capped at the 15% worst-case-scenario, but surely the subject of furious lobbying for the next year) and the rights and wrongs will doubtless be debated, particularly by newer, smaller operators which will struggle to get off the ground. I won’t go into any of them now.

One point, though, I will make – on the basis that I was sent a note by someone suggesting that companies which moved in the last year or so must now feel that they made an expensive mistake. Judging by the reaction of the City as reflected in some gambling share prices, it is a view that is commonly held.

I can’t comment on whether the decision will prove to have made financial sense for Coral, whose re-location was announced in the last month. But I can tell you from experience that companies that made the move before that are likely to be very happy with the decision they made.

Betfair stayed onshore for all of its first decade, to the bemusement of some. In fact, I remember being asked why on earth it didnt leave by a peer and former Chief Secretary to the Treasury, who told me that we must be a exceptionally unsavvy not to take advantage of a tax position which could not last forever. Businessmen, he told me, should be driven by numbers, not patriotism.

The eventual decision to move was taken after I left, but it was made on the basis that although my best guess was that a Place of Consumption Tax would be brought in, it would not happen before April 2013. The numbers were therefore crunched calculating that from that date, the costs of being offshore would be the same as being onshore. Net/net, the company would better off providing the new tax didn’t come in before then.

1st December 2014 therefore gives almost two years’ additional benefit. I should think they will have looked at today’s announcement with a smile of some satisfaction.

Posted in Betfair, Betting industry, Politics.

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  1. bigdipper says

    An even bigger kick in the teeth for betfair is the New South Wales High Court’s decision on taxation on the basis of turnover. In the company’s position I would trial a fixed-odds product asap on state races and try to get some sense of how much business they hold onto without any appearance of a trading facility.

Continuing the Discussion

  1. UK Gambling Regulation / Taxation Reform - Consultation paper linked to this post on April 17, 2012

    […] than the amount they'd pay in tax by staying in the UK. This is based on an interesting article here by Betfair founder Mark Davies (now no longer with Betfair). ~ Jez BetfairX Scheme – Get […]

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