Gambling

Supplementary written evidence submitted by bet365 (GA 104)

We welcomed the opportunity to contribute our thoughts in relation to the Select Committee’s Gambling Enquiry in the evidence session in November. In case it is helpful, we are just writing now to set out some further background information about our Company, along with a brief commentary on some of the key issues for bet365 and the industry, which the Committee has been considering.

We would be very grateful, therefore, if this could be treated formally as further evidence to the Committee’s enquiry from bet365.

bet365 – background and market position

Market position

· bet365 provides online Sports and Gaming products and services via its website www.bet365.com.

· bet365 is one of the world’s leading online gambling groups with over 7.5 million customers in over 200 different countries.

· bet365 is the largest online sports betting operator in the world, as measured by reference to International Accounting Standard’s definition of income.

· Winner of eGaming Review Awards 2010 and 2011, including Operator of the Year, Best Website Performance, Sports Betting Operator of the Year, and In-play Sports Operator of the Year.

Background

· The website was established in 2001 and initially provided Sports betting products only.

· As the business expanded and developed, it introduced various additional types of products and services to its website including poker, casino, games and bingo (together "Gaming" products).

· bet365’s Sports products have always, and continue to be, licensed in the UK and run from Stoke-on-Trent.

· Gaming products have always been licensed offshore due to historic restrictions in the UK.

Financials and UK Employment

· For the year ended March 2011, bet365’s gross win was £422m (Sports £316m) on amounts wagered of £8.5bn, with full year March 2012 forecasts currently being a gross win of £585m (Sports £435m) on amounts wagered of £11.0bn.

· In terms of revenues, around 75% derives from our Sports products.

· Approximately 75% of our revenues are from customers based outside the UK.

· The Group employs over 1,900 staff in Stoke-on-Trent, with a current annual wage bill in excess of £60m.

· bet365’s betting and gaming business saw EBITDA of £118.1m for the 12 months ended March 2011.

· bet365 pays approximately £130m in annual taxes in the UK – including corporation tax and non-recoverable VAT – of which betting duty compromises broadly 50%.

UK Betting Duty Taxation – Change in basis to ‘Point of Consumption’

· The current UK betting duty legislation requires a ‘UK-based operator’ to pay betting duty on all of its worldwide betting transactions, not just on UK-based players. This legislation is both out-dated and commercially prohibitive to a global operator being based in the UK.

· Certain overseas countries are currently introducing ‘Point of Consumption’ based taxation regimes. Such regimes reflect modern global business and seek to have the effect that in such territories, operators taking a licence in that country are required to pay taxes on betting transactions made by customers in that territory, as defined by the local regime.

· The UK gambling industry has seen all major online operators, except bet365, relocate overseas. This is clearly not in the interests of the UK economy as these overseas operators do not now pay any UK betting duty on UK players.

· Given the nature of bet365’s global Sports business, the current UK betting duty legislation is prohibitive to bet365, or any operator with an international business, having the UK as its base. Currently bet365 is paying duty on not just its UK customers, whilst everyone else is not, but also on all its overseas players. A ‘Point of Consumption’ tax is necessary to address this issue, and enable bet365 to remain in the UK with a commercially viable business.

· The Point of Consumption basis, coupled with sensible regulation, would result in the major operators taking up a licence in the UK, with consequential increases for UK tax revenues, and would also encourage companies to base themselves in the UK.

· bet365 remains committed, as far as it is commercially possible, to continue paying its fair share of UK taxes (including betting duty on UK and telebet customers, along with UK corporation tax and VAT ) and continuing with its significant contribution to local employment.

· However, for the continued viability of bet365 remaining UK-based, the introduction of ‘Point of Consumption’ based taxation measures in the UK will be essential, given bet365’s unique position in the marketplace, as the only major UK operator. We believe that these changes will also be in the best interests of the UK regulatory environment, as well as HM Treasury.

The future of UK licensing and regulation

· For bet365, the issues of taxation is the main commercial issue. As far as UK regulation is concerned, in the main we believe the regime established by the Gambling Act has worked reasonably well – though (primarily for taxation reasons) other online operators have clearly not chosen to locate and be licensed in the UK.

· Should the regime change along the lines proposed in the DCMS White Paper, we believe bet365 will be well-placed to satisfy likely UK licence requirements on our Gaming products, and any conditions regarding advertising, as we currently do for our Sports business.

We hope that you find the above useful for the purposes of the Select Committee’s Gambling Enquiry, but please feel free to contact us if you require any clarification or additional information.

John Coates

Joint Chief Executive

5 March 2012

Prepared 22nd March 2012