Supplementary memorandum from the Association
of British Bookmakers (DGB 96)
INTRODUCTION
1. The Association of British Bookmakers
(ABB) was formed in November 2002 following the amalgamation of
the Betting Office Licensees Association and the British Betting
Office Association. The ABB represents the major UK-based operators
of remote betting and casino gaming, including William Hill, Ladbrokes,
Coral, Stanley Leisure, Blue Square and bet365. Whilst supporting
the objectives of the legislation on the principles of informed
adult choice and the need to provide customers with a fair and
reliable product, the ABB would wish the Committee to be aware
that its members operate remote sports books and casinos in an
extremely competitive international market place. Customers have
considerable choice of supply and require access to fair, readily
playable products which offer good value. They have little regard
for the location of the licensee or the licensing authority and
it is also certainly true that individual brands and reputations
are far more important in encouraging loyalty and trust than regulatory
"kitemarks". The ABB has a number of detailed concerns
arising from the draft legislation. In this short submission,
it would wish to draw the Committee's attention to the most significant.
COST OF
REGULATION
2. DCMS estimate that the cost of regulating
remote gambling will be in the region of £2.8 million-£3.4
million[1];
the current cost is zero. Unless this cost is met centrally, this
very substantial sum will have to be borne by the industry. However,
it is not clear how many new remote gambling sites are expected
to locate in the UK or the basis upon which the charge will be
made. This is particularly relevant as both telephone betting
and on-line sports book operators are already located in the UK
(many having returned to the UK in 2001 as a direct consequence
of the agreement with Government on changes to betting duty).
We therefore have a major concern that a costly regulatory infrastructure
will be put in place but, unless the whole legislative and fiscal
framework for remote gambling is conducive to the running of commercially
viable operations, the cost will be borne by the existing operators.
This in itself will be a disincentive which is likely to result
in regulators without operators.
3. By way of comparison, the cost of operating
an on-line casino in Antigua is US$75 thousand per year; the cost
of operating an on-line sports book is US$50K per year and in
neither case is there any additional tax to pay. The ability of
UK-based operators to compete internationally is fundamental to
the success of this legislation in making the UK an attractive
proposition and these comparisons demonstrate how vital it will
be to get the legislative and fiscal balance right. The Committee
will recognise that a light touch in both areas will be essential
because a significant number of new operators will be needed to
meet a bill of £3 million. It must also be remembered that
there are many existing bookmakers currently offering small telephone
betting services who would be quite unable to sustain licence
fees even at the level of charges levied in Antigua.
LOCATION OF
EQUIPMENT
4. Section 21 states that an offence is committed
if a person provides facilities for gambling and does not hold
an appropriate licence. Under S25(3), S21 applies if at least
one piece of "remote gambling equipment" used in the
provision of the facilities is situated in Great Britain. S25(4)
then defines such equipment, which includes that needed "to
register a person's participation in gambling" and that needed
"to accept payment in respect of gambling".
5. Some service providers offer both sports
betting and casino gaming remotely; the equipment used to provide
these services is located in the UK in respect of sports betting
and offshore for casino gaming which cannot legally be provided
in the UK. For customer service reasons, it is normal to operate
a single account which can be used by customers to bet both on
sports events and casino games. The functions concerned fit the
quoted definitions from S25(4) because some of the associated
equipment is located in the UK. We are therefore very concerned
that, as currently drafted, operators would be committing a S21
offence for providing customer registration and payment processing
facilities in respect of their offshore remote casino operations.
6. We see no reason for proscribing customer
registration and payment processing in this way. The actual gaming
is taking place on equipment located outside the UK; it is not
an offence under either current or proposed legislation for a
UK resident to gamble remotely in an offshore casino, so the provision
of these ancillary services cannot be regarded as aiding an illegal
activity. Neither is it an offence for a person to act as an agent
in the UK for a real-world offshore casino and make registrations
and process payments on that casino's behalf. It cannot therefore
be either just or logical to impose additional restrictions on
remote operations in the manner proposed. Discussions with officials
indicate that the intention is for a licence to be required only
where the equipment on which bets are struck is located in the
UK. We are concerned that while that may be the intention, the
effect of the legislation as drafted will be very different if
it is not changed to reflect more accurately the stated intention.
SCOPE OF
THE LEGISLATION
7. The ABB has major concerns about the
scope of the draft legislation. Section 70 is excessively restrictive
inasmuch as it will apply to remote betting operations as well
as to remote casino gaming. Remote betting in the form of telephone
betting has been successfully conducted in the UK for nearly 70
years without the need for specifically targeted legislation.
In addition, betting over the internet has been operating in the
UK for over five years within the current regulatory framework
with few, if any, problems. It would therefore be quite wrong
to burden remote betting operators with regulations drawn up to
meet the different needs of remote casino gaming. Therefore, we
strongly believe that any future remote betting legislation should
be no more onerous than it is now. We recognise the need for efficient
supervision of remote casino gaming because this is a new activity
for the UK but its introduction does not justify more restrictive
regulation of remote betting.
8. In the context of remote betting and casino
gaming, the Bill should provide a legislative framework which
gives clearly defined provisions for the conduct of remote betting
and casino gaming. These should extend to definitions of what
constitutes betting and what constitutes gaming in a virtual environment.
It is wholly illogical to adhere to the current proposal which
states that if an activity is virtual, it is automatically regarded
as casino gaming. This is patently not true as many virtual products
are fixed-odds betting opportunities which are quite specifically
not casino gaming; indeed in some cases they could be defined
as betting or gaming depending on the platform upon which they
are offered.
9. There are differences between the original
DCMS position paper and the draft legislation, in particular on
the issue of where bets may be accepted from. If remote gambling
is to be successful, it is essential not to over-regulate or to
limit operations unnecessarily. It is not, in our submission,
for the Government to dictate to the citizens of other nations
whether or not they may bet on-line with UK-based companies by
forbidding such companies to accept bets from certain jurisdictions.
This is a regulatory matter for the nations concerned. The Committee
will recognise that the competitive disadvantage which would accrue
from such a restriction would in itself be sufficient to force
UK remote betting operators offshore and ensure that remote casino
gaming services are not located in the UK.
10. Codes of conduct are advocated in the draft
bill as a sensible way of regulating the gambling industry, an
approach which we fully endorse because it requires informed participation
by the industry itself. We believe that such codes, in the particular
context of the remote betting and casino gaming operators, should
include general as well as social responsibility issues. A draft
General Code and a draft Social Responsibility Code, agreed by
the major operators, are attached as Annexes to this paper as
indications to the Committee of the sort of regulatory framework
within which service providers would be content to operate. We
therefore invite the Committee to commend these Codes and this
general approach to regulation to the DCMS and the Gambling Commission.
11. We believe that the regulatory approach for
checking and verifying the integrity of online gaming systems
should be based on checking the operation of systems as a whole,
rather than the outdated source code testing regime currently
used in the land-based environment. Source code testing appears
to be the favoured option for DCMS and we believe this to be wrong
and unjustifiably onerous, thus adversely impacting upon the competitiveness
of the UK operator. The attached Annex explains in detail why
we take this view and the Committee is invited to take note of
this important issue, which we will be happy to expand upon in
oral evidence if required.
TAXATION
12. We are aware that taxation is a matter for
the Treasury and that it will not form a part of this legislation.
Nevertheless, the fiscal regime imposed upon remote gambling operations
will be one of the key issues to be considered by any operator
considering the UK as a base. We see no reason to suggest any
move away from gross profits-based taxation (GPT), but the rate
will be crucial. Traditional betting is subject to a 15 per cent
rate of GPT. However, there are already a number of exceptions
to the general rule. The gross profits of on-course bookmakers
are not currently subject to GPT and, in addition, betting exchanges
and spread betting operators are taxed differently to traditional
bookmakers. The precedent therefore exists for taxing different
forms of an activity in different ways. In deciding how remote
casinos should be taxed, the Treasury will need to be mindful
of the regimes in other jurisdictions that are considerably less
costly to the operator than our current land-based regime (see
paragraph 2 above). It is essential that a competitive, low-rate
taxation regime for remote casinos is put into place if operators
are to be persuaded to establish (or indeed retain) businesses
in the UK.
January 2004
ANNEXES:
A. Remote Betting & Casino Gaming Operators:
General Code of Conduct
B. Remote Betting & Casino Gaming Operators:
Social Responsibility Code
C. Systems and Software Testing For Virtual Fixed
Odds Betting & Casino Gaming
1 Draft Gambling Bill Regulatory Impact Statement,
DCMS November 2003. Back
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