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had closed the door on remote gambling.
may make it less attractive for operators to bid for casino licences and we could well see a reduction in the number of companies bidding for small, large and regional casino licences.
Warwick Bartlett said that Britain would miss out on a substantial influx of high-tech jobs. BDO Stoy Hayward went further in relation to clause 8 and said that the 15 per cent. rate sounded the death knell for Britains aspiration to be a regulated online gambling world leader.
I will now come on to the point raised by the hon. Member for Wirral, West (Stephen Hesford). I say at the outset that we do not automatically endorse the comments of the industry or analysts about the likely effect of the proposals. However, we genuinely want to hear from the Financial Secretary the full rationale for the proposals and what their effects will be. One of the reasons we felt we could not table amendments at this stage was that we did not know those effects in full, so I will be putting questions to the Financial Secretary towards the end of my speech.
Mr. Goodman: The hon. Gentleman cannot answer my question, which proves the difficulty of tabling amendments at this stage. However, to answer his question directly, we might table amendments on Report. A great deal will depend on what the Financial Secretary says and what we conclude when we mull over his remarks.
Mr. Goodman: The hon. Member for Wirral, West is getting himself into difficulty. I certainly cannot reach any conclusions without hearing from the Financial Secretary. We also want a reassurance from the Minister that the measures will not have the consequences for the industry that have been suggested.
As the hon. Member for Wirral, West makes his way towards the Chair, may I say that although we have not heard an explanation of the measures from the Financial Secretary, others have not been shy to offer their explanations? According to The Times, the Chancellors announcement was interpreted as having signalled
his personal distaste for gambling.
is not keen to see an expansion of the gambling industry.
evidenced by his decision to impose a 50 per cent. tax on big casinos in the Budget, means a Brown premiership would be unlikely to impose a new super-casino.
Tessa Jowells efforts to boost betting with the controversial Gambling Act were in tatters last night.
It reminded readers that the Chancellor and the Culture Secretary had not exactly formed a mutual admiration society and that she had not yet been reported to have signed up to his leadership campaign.
Such speculation is a reminder that these proposed changes in taxation are meant to be marching in step with the implementation of the Gambling Act 2005, to which the Financial Secretary referred, and, especially, the setting up of the new regional casino. However, while we have such proposed tax rises, we do not yet have the casino. Given that the casino and the implementation of the Act are directly related to the rates, let me remind the Committee of the story so far.
The Gambling Act, which will bring the regional casino into being, was preceded by a draft Bill that was examined by a Joint Committee of the Lords and Commons. In a submission to that Committee, the Treasury said that the proposed programme of deregulation
raises a number of challenges and issues on tax.
There is a very important potential supplementary role for tax reform to reinforce and reflect the sort of regulatory changes that the Bill is looking at.
On the tax side we are inevitably at a relatively early stage.
form the modelling that is obviously essential to considering any tax options for the future.
Investment will be dependent on taxation.
The economic impact study carried out by Pion Economics for the cross-industry group on gaming deregulation estimated that inward investment could amount to as much as £5 billion. Mr. Byrne of Sun International told the Committee:
We have been planning to invest upwards of £500 million if the regulatory conditions are absolutely right ... and so on.
The Treasury will use this work
when it considers the options for the future gambling tax regime.
It was reported that the Department for Culture, Media and Sport took the view that tax rates on gaming should be cut to ensure that the impact of the Bill was revenue neutral. On Second Reading, the Culture Secretary said that this was an error. She also said:
The point being made was that revenue is not a motivator for this legislation.[ Official Report, 1 November 2004; Vol. 426, c. 30.]
During consideration of the Bill, the number of proposed regional casinos was whittled down to one. After the Bill was enacted, the Casino Advisory Panel recommended that one regional casino should be sited in Manchester. The House of Lords Select Committee on Merits of Statutory Instruments expressed concerns about the potential effect of the decision on problem gambling, and 83 Labour Back Benchers signed an early-day motion urging the reconstitution of the Joint Committee to examine the Casino Advisory Panel decision. The Government then introduced a single order to put into effect the decision in relation to all 17 new casinos. As the Committee knows, in the other place the Government lost the vote on the draft order that would have established the casino in Manchester.
It is not an easy issue. There are many factors influencing the decision by remote gaming operators about where to locate. It is not clear that the rate of remote gaming duty will be the decisive factor. [ Official Report, Standing Committee A, 11 May 2006; c. 88.]
Setting aside, just for a moment, the views expressed by the industry, by independent analysts and so on, I shall put a few simple questions to the Financial Secretary. First, what specific estimate has the Treasury made of the impact of clause 7 on old and new casinos, on the profitability of the industry, on investment from overseas, and on jobs? Will that estimate be published? Secondly, what modelling, if any, did the Treasury do on the impact that any new duty on online gambling would have on applications for licences by companies based overseas? Thirdly, how many licence applications do the Government expect to receive? Fourthly, does
the Chancellor indeed have a personal distaste for gambling, and, if so, to what degree, if any, has it shaped his Budget decisions in these clauses?
Rob Marris: I am delighted that the hon. Gentleman, with whom I had great fun serving on the Select Committee on Work and Pensions during the previous Parliament, has generously given way. The reason I said from a sedentary position, Oh, come on, in response to his question to the Financial Secretary about the Chancellors views, was precisely because the Financial Secretary is not the Chancellor, so I doubt that he is in a position to give the Committee the Chancellors personal views on gambling.
Mr. Goodman: I suspect that the Financial Secretary is in a position to say more to the Committee than he might consider wise, but I am grateful to the hon. Gentleman, who signed an early-day motion questioning the decision to place the regional casino in Manchester, for raising that point.
Finally, what would be the effect of the changes when combined with what the industry describes as double taxation on Mecca bingo? When will a Minister make an announcement about what action the Government will take on their regional casino proposal following the defeat of their draft order in another place?
Rob Marris: I echo the hon. Gentlemans penultimate question about double taxation on Mecca bingo, which is being raised in my constituency, where such a facility exists. My constituency contains two casinos and the excellent Dunstall Park race course, where quite a lot of gambling takes place. The city of Wolverhampton was one of the 17 locations for a casino that were put forward by the commission. Given the configuration of the city, it is likely that were such a casino to come to Wolverhampton, it too would be within my constituencyat third casino, to complement the two that we already have.
I want to ask the Financial Secretary some perhaps disparate questions about schedule 1. It inserts a series of amendments to part 2 of the Betting and Gaming Duties Act 1981new section 26A, and so on. For ease of reference for hon. Members, I shall refer to the proposed section numbers to be inserted by schedule 1. Proposed section 26A(1)(a) includes the internet in the definition of remote gaming and what would be liable for remote gaming duty. Subsections (5) and (6) of proposed section 26J refer to the fact that the commissioners would be able to register a foreign
person for the purposes of a remote operating licence. Everyone involved would have to have such a licence.
Schedule 1 clearly contains extraterritoriality. The hon. Member for Wycombe (Mr. Goodman) referred to companies in different countries. I believe that this sort of gambling activity has been banned in the United States and that several such companies have moved to central America as a result. The tax rate would be 15 per cent, as provided for in proposed section 26C(1), in contrast to the rates of up to 50 per cent. that would apply for gaming duty generally, as provided for in clause 7(1). That is quite a discrepancy, which presumably has something to do with encouraging foreign operators to come to the UK, because I imagine that an intensely competitive environment exists around the world in this regard.
I suggest to my hon. Friend the Financial Secretary that the extraterritoriality will be rather difficult to police. As far as I can see, the definition of a person who provides facilities for remote gambling is not in the Bill. Proposed section 26A(3) states:
In relation to remote gaming duty P means a person who provides facilities for remote gaming.
One interpretation of that, and in particular the noun facilities, could mean that credit card companies are included. I have never indulged in this myself, but I would venture that most remote gaming involves the use of a credit card. Indeed, I believe that the way in which the Government of the United States of America have been able to clamp down considerably on such activity is not so much directly on the remote gaming companies as on the credit card companies who facilitate the transactions.
Will the Financial Secretary tell me whether the intention of that provision is to cover credit card companies? My understanding of the way in which such transactions work suggests that they would facilitate the provision of remote gaming. If that is the case, does he intend that credit card companies, as such facilitators, should be charged 15 per cent. on the profits that they makethe gross profitsfrom such transactions?
My final point relates to my intervention on the Financial Secretary during his opening remarks. It concerned clause 7(2), which increases the rate of duty that applies to unregistered gaming from 40 to 50 per cent. In the light of the extraterritoriality contained in schedule 1, is it the Governments intention that organisations abroad that provide remote gaming for UK residents and make profits thereon, and fail to register under the provisions of schedule 1, should be charged not the 15 per cent. rate set out in the schedule for those who are registered, but a 50 per cent. rate for providing unregistered gaming? If it is the Governments intention to charge that punitive rate for those abroad who fail to register, how will it be enforced?
First, I congratulate the hon. Member for Wycombe (Mr. Goodman) on his research. He employed a wide set of references, with the result that we heard just about everybodys views but his own during the course of his speech. I am sure that the
Committee would be interested to know whether he agrees that a new gaming duty rate of 50 per cent. is appropriate in the present circumstances, bearing in mind that it will apply only to profits in excess of £10 million gained in a period of six months, rather than one year, as he mentioned. For the purposes of the debate, it would be interesting to hear the views of the hon. Gentleman and his Front-Bench colleagues, rather than those of a wide sample of commentators.
The hon. Gentleman posed several questions, but mixed up his questions about the new provisions for the new remote gaming duty and questions about the changes to the rates and bands in clause 7. I shall deal first with clause 7 and the effect on the existing UK industry of the rate and band changes. As I explained to him, we carried out an assessment. Partly because the casino industry in the UK is a growing industry and partly because, from this year, we face a new situation in which the Gambling Commission oversees many aspects of social regulation, and restrictions on casinos have been relaxed by the Gambling Act, there is a good basis on which to make the sort of reforms of the gaming duty rates that we propose in clause 7.
The hon. Gentleman quoted a number of commentators speculating before the Budget about what decision we would reach on remote gaming dutythe new duty introduced by clause 8. That only served to demonstrate that it is better to reserve judgment until after the Budget is announced. Clearly, the principal newspaper article that he quoted, and Mr. John OReilly of Ladbrokes, were wrong in their speculation about what the Budget would bring.
The question to be asked in relation to remote gaming duty is whether offshore online gambling companies will choose to come onshore into the UK, to be regulated in the UK by the Gambling Commission and therefore also to pay tax in the UK. We considered the question of a new remote gaming duty and what the appropriate level would be. The hon. Gentleman quoted some of the exchanges that he and I have had in the past year or two. I have been looking into the matter for a couple of years. I met the Remote Gambling Association in the run-up to this Budget and the previous one, and officials have been in close contact with the association and some of its leading members. We have consulted on the draft legislation to introduce the new gaming duty. I do not think that we could have done more to get the structure right, but in the end the decision on the rate is for my right hon. Friend the Chancellor and me to take.
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