Clause 17

Finance (No. 3) Bill – in a Public Bill Committee at 11:30 am on 17th May 2011.

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Question proposed, That the clause stand part of the Bill.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

I think we can deal with clause 17 fairly briefly. As with the previous clause on tobacco, the principal problem here is tax avoidance. Although we do not oppose the increases in gaming duty, has the Minister made any assessment of the impact of those rises on likely avoidance? One clear example of avoidance is online gaming companies moving offshore. It is right that all gambling companies that operate in the UK markets, including those based offshore, make a fair contribution that could, for example, go towards the cost of education programmes and treatment for problem gambling. It is also clearly important that revenues are protected.

The previous Government were consulting on making offshore gaming companies pay for a licence to market gambling products to the UK. Many online gaming companies operating in the UK are based offshore, which means that they are outside UK regulation and taxation. Currently, a remote gambling operator is required to hold a Gambling Commission licence only if it has certain key equipment located in the UK. The Department for Culture, Media and Sport said in 2010 that the majority of remote casinos accessed by British consumers are regulated overseas. Many online betting operators that were previously licensed in the UK have also moved overseas.

At the same time, the online gambling market is growing very quickly. Total global revenues increased from $600 million in 1998 to $16.6 billion just 10 years later in 2008. Therefore, in April 2009, the then Minister responsible for sport, my hon. Friend the Member for Bradford South (Mr Sutcliffe), working with the Gambling Commission, asked his Department to look into the system of remote gambling regulation in Britain. In particular, he asked them to consider the regulation of overseas operators and the mechanisms required to ensure that those companies made a fair contribution.

Following that, in January 2010, the then Minister announced plans for new licence requirements for overseas online gambling firms. Under the plans, all online gambling firms active in the British market would be obliged to comply with a number of social goals, including sharing information about suspicious betting patterns with the Gambling Commission and UK sports governing bodies, and in relation to the protection of children and vulnerable people. They would also be required to contribute to the research, education and treatment of problem gambling in Britain. The Department for Culture, Media and Sport was also of the opinion that, following those rulings, the introduction of national licensing systems would be permissible under European law. Other European countries were also moving towards national licensing systems.

The Department then launched a consultation on the policy in March 2010. The consultation did not explore the tax issue in detail, as that was a matter for the Treasury. However, the Department was clear that introducing the licensing system for overseas operators would help bring in revenue and that close liaison with  the Treasury was needed. The Minister said that it would mean that overseas firms contributed their fair share in tax towards all the social costs of gambling.

What has happened to that policy? It appears that the Government have either dropped or delayed it. The consultation ended in June 2010. Does the Minister consider it an important issue in terms of gambling taxation? What discussions has she had on the issue with the Department for Culture, Media and Sport? In the context of protecting and maximising revenues from gambling operators, what assessment has she made of the likelihood that further operators will move abroad, and what steps has she taken to protect the Exchequer?

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury 11:45 am, 17th May 2011

Clause 17 increases the thresholds for the gross gaming yield bands for gaming duty in line with the retail prices index. The change will take effect for accounting periods starting on or after 1 April 2011. The gaming duty rates remain unchanged.

As I am sure the Committee is aware, gaming duty is a banded tax, with marginal rates varying between 15% and 50%. Revalorising the duty bandings will prevent fiscal drag: that is, it will prevent businesses from being dragged into a higher tax band by inflation. An increase in the bands in line with inflation is already assumed in the public finances.

The hon. Member for Bristol East asked about remote, offshore and online gambling. She is right to point out that the industry has shifted significantly in recent years. She is also right to point out that under her Government and this one, DCMS has considered what that means for gambling regulation. I reassure her that I have met a Minister in DCMS to understand what those considerations are and the potential tax implications for any DCMS proposals as they develop. We are now discussing the implications with DCMS, and we are also holding informal discussions with the industry. I assure her that we are absolutely working with DCMS. It is a critical part of the regulatory system, and any tax measures would need to fit into it. That work continues apace. She will also be aware that DCMS is interested in considering problem gambling. The prevalence study came out earlier this year. I am sure that Ministers wanted some time to consider what that study—it is not annual; it happens every few years—said about problem and remote gambling.

With that reassurance, I commend the clause to the Committee.

Question put and agreed to.

Clause 17 accordingly ordered to stand part of the Bill.