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Betting-Tax Revolution: Transformation Looks to be Waiting Just Around the Corner

26 February 2001

U.K. – Feb. 26, 2001 – As reported by the Racing Post: ``Calling for a cut in betting duty is an annual event, and one, which has twice been successful.

``… Achieving a tax cut is never easy.

``… After the Budget, a Government spokesman declared:

```There is no evidence that we are losing tax revenue. Betting duty raised £480 million in 1998/99 and will raise about £490 million in 1999/2000. There is a potential problem but not a short-term problem."

`` The Government could afford to wait and see.

`` A chink of light

`` The Government had not cut betting duty but it did not ignore the issue altogether.

``…It was searching for a structure that would enable UK bookmakers to compete internationally, offer the prospect of appropriate financial support for racing, and contribute fairly to the Exchequer.

``… Pre-budget report

`` By the time Gordon Brown delivered his pre-Budget report, last November, it had been decided that something needed to be done.

`` `Following the consultation announced in Budget 2000, the Government believes there is scope to modernise the way betting is taxed in the UK

``… Further discussions were to be held with a view to an announcement in Budget 2001.

``… The Treasury's position had clearly moved forward since 2000. Its view now appears to be that:

`` The current betting-duty regime cannot be sustained because the growth of 'tax-free' offshore betting will soon result in a significant loss of tax revenue.

`` There is a large global market for telephone and internet betting, which the UK has the potential to lead, but which it cannot exploit effectively under the existing tax structure.

`` Replacing the current tax on turnover with a gross profits tax is a viable proposition, but only if the major UK bookmakers move their offshore operations back to the UK and abolish deductions to punters.

`` A system based on taxing gross profits is open to evasion but, politically, is more palatable than simply cutting the rate of betting duty, which would expose the Government to a charge of favouring gamblers over, for instance, drivers.

`` There is now a widespread expectation that betting duty will be replaced by a GPT of 15 per cent, but the following cautionary points should be borne in mind:

``Arguments in favour of a rate of 15 per cent are based on assumptions relating to future turnover. The Treasury may be unwilling to accept these assumptions

``… A radical change in the tax regime is unlikely to be implemented until 2002.

``The Treasury will not introduce GPT unless the major bookmakers agree to repatriate their offshore operations and scrap deductions to punters.

``Before tax reforms are introduced, the Government may also want agreement over future funding of the racing industry.

`` On Budget Day, March 7, Gordon Brown is likely to declare that the Government is minded to change the system for taxing betting. He will announce that it is considering replacing betting duty with a tax on gross profits, with a view to introducing new arrangements next January.

``… It is just possible that, as an interim measure, the Chancellor will announce a cut in the rate of betting duty to, say, five per cent…"

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