UK Gambling Act Under Attack for Tax Legality by Gibraltar

Here’s another good reason for Bitcoin gambling casinos: Less government haggling to get their “fair” share. Needless to say, governments are a few steps behind in tapping digital currency, and in the case of the Gibraltar Betting and Gaming Association’s dispute with the legality of the UK Gambling Act, this proves no different. Online slot games are massively popular in the UK (known as fruit machines to players in the United Kingdom).

The UK Gambling Act, which was introduced in 2014, was recently challenged by the Gibraltar Betting and Gaming Association. The complaints filed claim that the POC tax violates article 56 of the treaty that stipulates the EU’s provision that all countries may trade freely across borders and is therefore illegal under current European Law.

Online casino based in numerous different countries throughout the EU were whitelisted by the UK before the UK Gambling Act went into effect. This afforded companies a stabilized and more competitive tax rate no matter their location within the EU. But the newly challenged legislation has placed a 15% tax on any online gambling exchanges involving British citizens, and now requires all companies to also be licensed and regulated by the UK. Hit particularly hard by these new UK tax requirements is Gibraltar.

Later in 2014 the Gibraltar Betting and Gaming Association challenged the Act in the high court, but was rejected in October of that year. When Gibraltar narrowed its focus on the POC tax element of the UK Gambling Act and sought a judicial review of its legality, the GBGA succeed in receiving a referral to the European Court of Justice.

Maciej Szpunar, the advocate for the European Court of Justice, offered his opinion on the nature of the case, stating “Although this case is about the relationship between an island and a rock, I will not resort to the plot device of a cliff hanger in this opinion. I propose that the court should hold that, for the purposes of Article 56 TFEU, Gibraltar and the UK are to be treated as one entity.”

On the specific issue of the legality of the POC tax, Szpunar said the GBGA and the Gibraltar government took issue with the fact that the taxes in question are not restricted to actual consumption taking place in the UK because the customer, that is the chargeable person under the new tax regime, may not be in the UK at the time of the transaction.

Spuznar explained, “There is a purely internal situation which does not trigger the applicability of Article 56 TFEU. In the alternative, should the court find otherwise, I propose that the provisions of the new tax regime which are contested in the present case should not be regarded as a restriction on the freedom to provide services, given that they apply without distinction and on a non-discriminatory basis to gambling service providers located in the UK and elsewhere.”

The GBGA seems to specifically take issue with the POC tax because it does not limit itself to consumption that takes place within the boundaries of the UK, and instead claims all British citizens no matter where there are physically located at the time of playing.

But the ECJ advocate elaborated, “It is certainly true that a person who is resident in the UK and registered as a UK person with his/her credit card details may participate in online gambling, that is enter into a transaction, while on holiday elsewhere abroad. That is not the point, however. What is crucial is which legal jurisdiction each person is the subject of. If a person is registered in the UK because this is where he has his center of interest, then I fully understand that, for the purposes of the consumption tax, he is regarded as consuming in the UK.”

Another way of saying this is that that while the internet affords remote accessibility and the ability to process financial transactions from anywhere in the world, it does not necessarily preclude anyone from consuming in their home member state. The ability to gamble online outside of one’s member State simply does not outweigh individual member State rights, while not prohibiting free movement of goods, which would be another matter altogether.

The European Court of Justice’s Advocate opinion is not required to be in step with the court’s rulings, yet it does have a precedent of being in agreement. Gibraltar government officials have acknowledged the opinion but has not yet commented, nor will do so until a final judgement is given by the ECJ.