Blow for Gibraltar in UK Remote Gambling Tax Regime Case

January 23, 2017 / by: Gray Peterson

The more than two-year-long Point of Consumption tax dispute between Gibraltar and the UK’s HM Revenue and Customs has once again landed another massive blow on the Gibraltar Betting and Gaming Association (GBGA).

The Advocate General of the EU Court of Justice on Thursday stated that UK and Gibraltar should be considered as one EU member state. This opinion by the Advocate General is expected to negatively affect GBGA’s argument that the PoC tax went against Article 56 of the Treaty of the Functioning of the European Union (TFEU).

Article 56 of TFEU prevents member states from instituting restrictions that may curtail the free movements of goods and services across EU.

According to Advocate General, Maciej Szpunar, the claims that PoC tax violated the TFEU are unfounded. He argued that if Gibraltar and UK were treated as one member state, the PoC dispute would be an internal affair and there would be no need to for Article 56 to be used as a reference in this matter.

In 2014, the UK government introduced another remote gambling taxation system which came in the Gambling Act of 2014. The new law instituted a new precedent which shifted the focus of regulation from the point of supply to the point of consumption. The PoC tax measure called for all UK-facing operators located within or beyond the county’s borders to pay 15% on revenue from services provided to UK Gambling customers.

Even before the taxation regime came into action, Gibraltar contested it, but the UK High Court of Justice rejected their argument in 2014. In 2015, GBGA revisited the matter and took it to the European Court of Justice. A final ruling is yet to be made as the case is being deliberated in the EU Court of Justice.

As stipulated by the EU laws, any views or opinions by the Advocate General should be taken into consideration, but the union’s Court is not obliged to take them into account. This means that even though the Advocate's opinion does not constrain the Court, their final ruling may not favor this small territory of Gibraltar.

Gibraltar has become a popular destination for offshore operators to establish their offices, something that is attributed to its lax tax regime when compared with other jurisdictions. This tiny British territory houses some of the largest UK-facing operators. The PoC tax was received with displeasure by the Gibraltar since online gambling has become an important sector of their economy.

Gibraltar local government and GBGA have relentlessly tried to convince the courts that since they are a separate territory, they should be allowed to offer services without interference and unfair treatment.

 GBGA expressed their disappointments after Thursday remarks from the Advocate General, but they insisted that they are waiting for the ruling of the EU Court of Justice.

Tagged with: Legislation