“Any tax rate above 10 percent could lead to the growth of a black market”

Why is RGA disappointed with UK Budget and draft Finance Bill? What is RGA’s position?
To begin with the 15% tax rate is too high. Three major economic consultancies (KPMG, PwC and Deloitte) have all looked at the situation and determined than any rate above 10% could lead to the growth of a black market. HM Treasury itself has based its estimates on only catching 80% of the market so it is hugely disappointing that 15% has been retained.
In addition the current tax system is something of a mess with online companies becoming subject to two and sometimes three different British tax regimes, each of which have different conditions attached to them. Of particular concern is that bonuses on sports betting are not tax deductible and this pushes the effective rate even higher.

Why do you feel the UK tax rate is unreasonable?
Our main concern is that it is uncompetitive internationally and very much higher than that which those who dominate the UK market currently pay.

How do you propose changing it?
We would like bonuses and incentives to be tax deductible and for the base rate to be no higher than 10%.

Why do you think the majority of the larger British firms operate from other jurisdictions? How can this be solved?
It is almost without exception because the cost of doing business in those jurisdictions is much lower than if they were based in the UK. It is still doubtful whether any will physically relocate to the UK even after the tax and licensing reforms are introduced.

How do you think a viable long term UK market can be established?
The only way is if customers can be given the value, choice and service that they have come to expect.

Recently, RGA joined the Industry Group for Responsible Gambling (IGRG); what can you tell us about this, what is the reason for this move?
IGRG is primarily there to consider cross sector initiatives that might help to promote socially responsible gambling.  This might be the sharing of good practice between sectors or truly cross-cutting areas like responsible advertising.

What are RGA’s main goals for 2014?
Inevitably the UK will be a major focus this year as both the new licensing and tax frameworks are implemented so we will work hard to ensure that process is as painless as possible. Beyond that I would expect Greece and Eastern Europe to figure prominently in our work programme.

What are your predictions for the gaming market in 2014?
For online there will inevitably be further global growth and the World Cup in the Summer will be a huge event from a betting perspective. That aside the trend towards more jurisdictions offering licensing regimes will continue and the use of smartphones and tablets for online gambling will accelerate.

What is your view on the European regulatory frameworks?
They are very patchy and there are no real moves towards sensible harmonisation across the EU.  Co-operation between Member States is getting better and we can only hope that leads to the sharing of good practice and not the spread of bad.

How do you see the gaming industry in general?
New technologies and the way that they become a bigger and bigger part of everyday life will create new opportunities for the online sector. However, land-based gambling is a different experience for players and good businesses will continue to thrive there too.

In your opinion, which European countries have the most advanced and mature regulatory frameworks?
The truth is that for all of them, apart from Gibraltar, Alderney and the Isle of Man none of them have regulated substantial numbers of online companies for any meaningful time so I’d rather reserve my judgement, but certainly there are aspects of the Danish, Spanish, Italian and British models that all have something to commend them.

And what about Latin America?
Latin America has huge potential, but there will be uncertainty until some of the major countries introduce their own regulatory regimes.  It will happen but obviously there are other political priorities and countries will want to satisfy themselves that it can be done properly. Spain might be an obvious jurisdiction for them to look at as a potential model.

Which countries have a higher growth potential in online gaming?
The USA clearly has immense potential but, like other major jurisdictions such as China and Brazil, there is a long way to go before it can become a reality.

How do you think the industry will evolve?
There seems to be a consensus that consolidation will continue and the increasing costs associated with operating in fully regulated markets will make it harder for some smaller operators to compete effectively in those countries. Competitive pressures might also fuel innovation, but in a regulated market that is not always easy.

What challenges does the UK face?
The biggest challenge faced by the UK is in ensuring that the market place which develops as a result of the new regulatory and tax changes is one in which businesses can be viable in the long term and consumers are not tempted by black market operators.