British tax havens take gamble on Internet casinos

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British offshore tax havens Alderney and The Isle of Man will allow online casinos to operate on the islands, officials say, raising the stakes for bringing a multi-billion dollar industry to Europe.

 

English Channel island with a population of 2,400 and an economy dependent on tourism, is the first out of the gates. It will begin taking applications on Wednesday for six new e-gaming licences, said Moran Chapman, chief executive for the Alderney Gambling Togel Hongkong  Control Commission.

The Isle of Man will announce in the coming weeks that it has created three new e-gaming licenses, a gaming official there said. Both jurisdictions, which are independent from British rule, passed the legislation last month.

 

“It’s not a race,” said Chapman. “It’s a global industry. All sorts of people will become involved in [online gaming industry] in one shape or another.”

 

The lure is that online gambling – from betting on horses and American football to virtual blackjack and roulette – has become a large and growing activity. A commonly cited report by U.S. gambling consultancy The River City Group says the e-gaming industry will grow to a $5 billion market by 2003.

 

At the moment though few jurisdictions permit online gambling and some lawmakers, particularly in the United States, are seeking complete bans on the nascent industry.

 

EARLY SIGNS OF E-GAMING ACCEPTANCE

 

In the U.S., the Nevada legislature has gone against the strong federal sentiment in Washington, by passing a state law earlier this year allowing for online casinos. Similar local laws are pending in Australia and parts of Canada.

 

But otherwise, the online casinos, which, according to a Bear Stearns study, comprises roughly 1,400 sites, have been forced to set up shop in areas such as Costa Rica and the Caribbean island of Antigua, known for their more relaxed regulatory policy and favourable tax rates.

 

The lenient, if not non-existent, regulation over the casino sites has created an unsavoury reputation among consumers who don’t trust a casino operator they can’t see, experts say.

 

“It’s been the real wild west,” said Steve Donoughue, managing director of London-based The Gambling Consultancy. “The problem has been no decent jurisdiction has been willing to say, ‘Let’s have Internet casinos.'”

 

Alderney is trying to change that image. Any new licence holder would be subject to regular background checks by both the island’s gambling commission as well as The Gaming Board for Great Britain, which regulates the United Kingdom gambling industry, Chapman said.

 

Successful applicants in Alderney would pay an annual fee of 75,000 pounds ($108,600) for three years, with an option to renew annually afterwards. They would be subject to a corporate tax rate of 20 percent, Chapman said.

 

The Isle of Man will charge 80,000 pounds ($116,000) per year for each of its e-gaming licences. It will also levy a 2.5 percent tax on all gross gambling profits, but there would be no corporate tax charged, said Derek Cannon, gaming inspector at the Isle of Man. The island government will not regulate the firms, he added.

 

Both Alderney and The Isle of Man are keen to attract the blue chip firms. UK-based bookmakers William Hill already has an online casino and bookie businesses, both incorporated in Antigua.

 

“At the moment we see no reason to relocate,” a William Hill spokesman said. He added that William Hill’s Internet software operation is based there, complicating a move. “But obviously we would be interested in any developments nearer to home.”

 

But the big British bookmakers, including William Hill, and Ladbrokes, a division of Hilton Group Plc (LSE: HG.L – news) , have said they would abandon their off-shore online betting operations now that the goverment has promised to abolish a betting duty of nine percent in October. Many bookmakers have set up their Net operations in distant, tax-friendly locations such as Gibraltar, Malta and the Caribbean, to shield gamblers from this duty.

 

Alderney and the Isle of Man’s new licenses could expedite the companies’ return to the British Isles, experts say. “There is a demand for licences in well-regulated jurisdictions,” Donoughue said.

 

Officials on the Isle of Man and Alderney said they’ve already received dozens of enquiries.

 

 

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