The Gibraltar Betting and Gaming Association (GBGA) has received another heavy blow in its more than two-year-long Point of Consumption tax dispute with UK’s HM Revenue and Customs.
An Advocate General at the Court of Justice of the European Union said on Thursday that Gibraltar and the UK should be considered a single EU member state; an opinion that will likely affect negatively GBGA’s claim that the PoC tax violated Article 56 of the Treaty of the Functioning of the European Union (TFEU).
Here it is important to note that the article in question prevents member states from introducing restrictions that could hamper the free movement of goods and services within EU borders.
In Advocate General Maciej Szpunar’s view, the PoC tax did not run afoul of the TFEU. According to him, if the UK and Gibraltar were treated as a single member state, that would mean that the PoC dispute was an internal affair and Article 56 could not be cited as an authority for an action.
The UK introduced a new remote gambling taxation system back in 2014 as part of the Gambling (Licensing and Advertising) Act 2014. Generally speaking, the new law switched the focus of regulation from a point of supply to a point of consumption.
The PoC tax came as an important provision within the Act. It required all UK-facing operators, no matter whether they were located in or outside the country, to pay 15% on revenue from UK gambling customers.
Gibraltar contested the new taxation regime even before it came into effect. However, its claim was rejected by the UK High Court of Justice in 2014. The GBGA renewed its efforts in 2015 and a final ruling on the matter is yet to be announced. The regulatory body’s challenge is now to be heard in the European Court of Justice.
Under EU laws, the union’s highest court is not obliged to reckon with its Advocate Generals’ opinions, but they are usually taken into consideration. In other words, the Court of Justice’s final ruling may not be one to please the tiny territory located on the southern tip of the Iberian Peninsula.
Due to its rather lax tax regime, Gibraltar has turned into a favorite destination for international gambling operators to base their offices in. The British Overseas Territory currently homes some of the largest UK-facing operators. This has made the online gambling industry a key sector there, hence Gibraltar’s displeasure with the PoC tax.
The GBGA and the local government have been trying to convince courts that as a separate territory, Gibraltar should have the freedom to provide services and be treated evenly and that freedom extends into its relationship with the UK.
Following Thursday’s developments, the GBGA issued a statement to express its disappointment. The regulatory body further noted that it will now wait for a ruling from the EU Court of Justice.
Brexit Fears
Last summer, Gibraltar’s trials related to its PoC tax issue were complemented by worries of what would happen to the territory and its thriving iGaming industry and overall economy after the Brexit vote.
If the UK leaves the EU, so does its Overseas Territory. This could mean that its border with Spain may be closed, thus cutting off free movement of people.
What is more, at present companies, including gambling-related ones, can base their operations in Gibraltar and trade across the EU. Brexit could change the UK’s, and its territory’s, single market position. And this could result in implications for the gambling operators registered in Gibraltar.
Although gambling companies do not seem that much bothered about the future, or at least for now, it is curious to see what it will bring upon the industry.
