News
Obverser Article. Tax blitz on online betting.
Published: Sunday January 16, 2005 Nick Mathiason, The Observer
Gordon Brown is to clamp down on internet betting exchanges and will demand that they pay more duty to Customs and Excise.
The Treasury will make its move after a National Audit report has revealed that out of £2.67 billion wagered on exchanges, a paltry £7.3 million was paid to Customs and Excise last year. This compares with £376m paid by bookmakers on bets worth close to £30bn.
Online exchanges allow punters to be the bookmaker and set odds on any event. They take commission on whoever wins each bet. But bookies have been up in arms because those who offer bets on exchanges give far more generous odds because of not paying any duty.
A Whitehall insider said the Treasury will move within months to close the loophole. A well-placed industry source added: "The duty and the commission that exchanges make just doesn't add up. It's all pointing to the Treasury acting to stop this."
If the Treasury moves, it will be a serious blow to Betfair, which controls 95 per cent of money wagered on exchanges. The firm is desperate to float or engineer a buyout, but uncertainty over the tax regime it will face has delayed any decision.
Since exchanges emerged nearly five years ago, traditional bookmakers have lost business. However, this has been compensated for by a fourfold increase in revenue, thanks to the Treasury axing the tax on punters' winnings.
Exchanges have long been accused of being used to fix horse races and as a convenience for money-launderers. But a separate report last week suggests that criminals are now using bookmakers to place large bets on the out come of a single Premiership match instead. An in-depth analysis by the Centre for the Study of Financial Innovation said money-launderers can suffer losses of up to 25 per cent but are prepared to tolerate this because there are few checks on punters' identities by traditional bookies.
"Remarkably, bookmakers' activities are not included in the scope of the UK Money Laundering Regulations 2003," the report's authors said. "We strongly believe that cash-based betting is a potential loophole that needs to be examined."
Thanks to Sam for finding this article and posting it on the forum.