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Gibraltar to Raise Gambling Taxes Next Year

20 December 2010 by admin

euopean union flagIt took a while, but the European Union has finally gotten around to ruining the special status of Gibraltar as a perfect destination for online gambling companies. For years, the island off the coast of Spain has been the top spot for Internet gambling companies, sort of a Macau or Las Vegas for the online market. All of that will change next year, because Gibraltar’s gambling taxes are set to skyrocket.

For years, online gambling operators have flocked to the small island nation because of its low tax rate for the industry. The nation has only a 1% gambling levy, which is significantly lower than the rest of Europe.  In addition, the tax rate has a ceiling of €500,000 annually. The friendly tax rates allow the businesses to be profitable even during tough economic times.

GreedThe current tax rate of Gibraltar is so enticing that two of the top sports books in the UK, William Hill and Ladbrokes, moved their operations to the country earlier this year. In doing so, they avoided British tax rates of 15% on gross profits and a 10% racing levy. Never underestimate the ability of authoritarian government bodies to hinder profitability, though. It seems that having a tax rate low enough to attract companies to your market – what any businessman would call a “good idea” – is in violation of European Union rules.

That shouldn’t come as a surprise, given the EU’s socialist aversion to free-market competition. The EU sees competition as a bad thing, rather than something that drives down prices for consumers while simultaneously increasing profitability for companies. In short, free-market competition is a win-win situation for everybody but big government bodies, including the EU. As such, European Union laws require that member states tax an industry at a rate comparable to the rest of the EU states. That way, countries can’t compete for business.

Gibraltar has always been in violation of the EU tax laws, but starting next year, they will come into compliance. As a result, Gibraltar’s gambling tax will skyrocket from 1% to 10%, which is exactly the kind of think that reduces profits, stifles growth and leads to a shedding of jobs.

spain unemployment 2Thanks to its low tax rate and resultant profitability, only 2% of Gibraltar’s workforce is unemployed. Contrast that with nearby Spain, where taxes are high and competition is discouraged by tight regulation in the name of “equality.” The unemployment rate in Spain is 21% and the country is in a debt crisis that threatens to crumble the entire economy. The same can be said for Greece, Italy, Portugal and Ireland, yet the EU wants every country to be like those failing nations.

Though Gibraltar’s gambling tax rate is set to jump sharply beginning next year, resulting in less profits and fewer jobs, no one expects businesses there to relocate. The 10% tax rate would still be no higher than any other European nation and Gibraltar will not institute a Value Added Tax. Therefore, though companies in Gibraltar will not be as profitable and they will no longer entice businesses to relocate there, they should at least get to keep the businesses that currently operate in the country.

4 Responses to “Gibraltar to Raise Gambling Taxes Next Year”

  1. James says:

    Thanks for your input, Don. You probably should have read the entire article, though. For example, I never said anyone was planning to leave Gibraltar. In fact, what I actually wrote was “no one expects businesses there to relocate.” Then later I wrote that Gibraltar “should at least get to keep the businesses that currently operate in the country.”

    Also, for someone who feels so superior to people he thinks write “poor reporting,” I would expect you to know that “maybe” is one word, not two.

  2. don ferranti says:

    What total rubbish! This article has been copied and exaggerated from the already inaccurate drivel in the UK media. Ask the operators what is happening. No-one is planning to leave and there is a long queue to get a look in, never mind a licence. Very poor reporting, shame on you. May be Malta or Alderney wrote it for you?

  3. James says:

    Jennifer,

    Thanks for your input. While 10% is pretty standard for the region (as I wrote), it is still ten times the current rate. It is impossible for the companies to make the same profits at that rate without cutting costs in one way or another. Or they can simply lose a lot of their profitability (or both).

    While I certainly don’t expect this tax hike to collapse Gibraltar’s economy, it will hurt. I can think of zero examples, in any country, of tax hikes creating jobs and stimulating the economy. It has simply never happened.

  4. Jennifer says:

    I don’t know this POV seems a little “red-scare” for me…
    10% is still a very reasonable amount- particularly since that money would be used to help stimulate the economy and promote more thorough regulation. That means more jobs, not less. Let’s face it the Online casinos and their employees aren’t hurting nearly as bad as the average government employee.
    Not to mention, that the more online casinos set up shop in various countries, the more the Union’s economy will benefit from that increased tax revenue as a whole.