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Friday, 23 March 2012 08:39

Casino Games In the 2012 Budget

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The 2012 budget is out. What does it mean for the gambling industry?

The casino games industry is up in arms following George Osborne’s announcement of the UK 2012 budget, which lays out the financial plans for the year ahead. In addition to cutting the tax rate for those earning over £150,000 and reducing corporation tax by 1%, the government is introducing a 20% machine games duty.

‘One area where I am today making substantial changes is gambling duties,’ the Chancellor said. ‘The VAT treatment of gaming machines is being repeatedly challenged by operators in the courts. So I will introduce a new Machine Games Duty - with a standard rate of 20 per cent and a lower rate for low stakes and prize machines of 5 per cent of net takings.’

The news does not bode well for small and medium-sized operators, whose revenue neutral position is estimated to be around 16-17%. It’s likely that with the introduction of the duty, many will be forced to close – months after London Mayor Boris Johnson called for a planning law to curb the spread of betting shops.

Even online gambling companies did not escape the changes. In order to discourage them from moving their headquarters offshore, the government has modified tax law so that it is based on the place of consumption, not the location of the company. In 2005, the Gambling Act’s place-of-supply emphasis saw major operators shift their operations overseas to places like Gibraltar or Malta. Osborne says the shift back to place-of-consumption laws, which is similar to the laws in several other European countries, will support jobs in Britain and create a level playing field.

What remains to be seen is whether the changes will indeed encourage operators to return to the UK and foster healthy and fair competition, or whether it will see the closure of smaller companies and the proliferation of illegal gambling.