Inside Asian Gaming

INSIDE ASIAN GAMING | March 2010 42 would have to pay additional licence fees. But these fees (in addition to any local taxes that they are already having to pay) are likely to pale into insignificance when compared to the tax savings achieved from being located outside the UK (especially for those operators with larger turnovers). The UK government has indicated it may keep the ‘white list’ in “some form”, but has not given further details. Until this point is clarified, online operators face a degree of uncertainty regarding their future operations. Yet it is inconceivable, with an election due to take place in the UK no later than June of this year, that the UK government will find the time both to finalise these proposals and enact the necessary legislation. 2. National licensing systemwith taxing rights Several EU Member States are currently proposing to introduce a national licensing system for remote gambling that, in many cases, is to be underpinned by blocking mechanisms to halt financial transactions and/or deny Internet access to unlicensed gambling websites. These plans are generally founded on a desire that, to be able lawfully to offer gambling services in a Member State, operators should also be registered, andpay taxes, in that sameState. This clearly raises European law issues, particularly questions concerning the principles of the freedom of establishment and the freedom to provide services. SomeMember States have attempted to oblige remote operators to be established within their jurisdiction. That’s with a view to bringing the operators within the direct tax net such that their profits are subject to corporate income taxes in that Member State (in addition to any local gambling duties). To date, the European Commission has not permittedMember States tooperate such licensing systems, having scrutinised both the Italian and French systems on such grounds. In contrast to the Commission’s approach to date, the European Court of Justice (ECJ) ruled last year that Member States may restrict remote gaming operators established in other Member States from operating and advertising in that Member State on grounds of protecting national consumers against potential fraud and crime. Despite the ECJ’s recent support for Member States taking a more restrictive approach, however, the trend in a number of key EU Member States is towards a degree of liberalisation of regulatory and tax policies. France has historically maintained a strict state monopoly on betting (including betting on horse racing) and lotteries. The Commission opened an infringement procedure in June 2007 against France to verify whether its national measures, preventing the cross-border supply of online gambling services, were compatible with EU law. In 2009, France introduced proposals to open up its online gambling market but Regulation only in relation to certain products, namely sports betting (including pool betting on horse racing) and poker. Assuming such proposals are adopted, operators from outside of France could apply to be licensed in France (with licences held in other Member States being taken into account but not guaranteeing the issue of a French licence). French licensed operators would have to maintain websites containing the “.fr” country code top level domain name and the relevant IT infrastructure (server) would have to be located in France and duly approved by the regulatory body. It is proposed that tax would be levied on stakes placed by customers at the rate of 7.5% for horserace and sports betting and at the rate of 2% for poker games. Specific levies would also be applied to all gambling and betting transactions at the additional rate of 1% (rising to 1.8% in 2012) payable by licensed sport operators (to fund the National Centre for the Development of Sport) and of 8% on horserace betting (to fund the French racing industry). Gambling companies incorporated in, with their place of effective management in, or carrying on operations (presumably through a permanent establishment) in, France would also have to pay corporate income tax at the headline rate of 33.3%. Italy proposes to introduce new remote gaming and licensing rules (which have received the Commission’s approval) that are less restrictive than those currently proposed by France. In order to qualify for an Italian remote gaming licence, operators would have to be licensed and established within an EEA State and have a permanent link-up with the AAMS (the Italian licensing authority) centralised systemfor compliance, monitoring and tax purposes. Historically, Italian tax was levied on online fixed odds sports betting at a rate of 3% of turnover on single bets and 5% of turnover on multiple bets. Together with proposals to introduce remote casino and poker-type games into the Italian licensing system, recent proposals have been made to change this basis of taxation to a tax at the rate of 20%of gross profits (essentially stakes less winnings) on most remote betting and gaming. However these proposals have not yet been enacted. Gambling companies incorporated, or with a permanent establishment, in Italy are subject to Italy’s corporate income tax, which is currently levied at the rate of Casino Grand Cercle, Aix-les-Bains, France