The extent to which the 2007 Budget took the UK gambling industry and
investors by surprise cannot be underestimated. Only a week before Budget
day the Daily Telegraph had proudly trumpeted; "In a surprise move, the
Chancellor will use the Budget to announce that in return for a small amount
of tax – possibly as low as 2pc or 3pc – companies can obtain a UK licence
and still remain based overseas. The new tax will be called Remote Gaming
Duty. This compromise would allow gambling companies to avoid British VAT."
John O'Reilly, the head of online gambing at Ladbrokes was quoted as saying
that he was pleased with the deal, which he described as "quite a
breakthrough," whilst Clive Hawkswood, the chief executive of the
Remote-Gambling Authority, justified a low rate of tax on the grounds that
"these companies have grown up in zero tax jurisdictions. They operate on
very thin profit margins. A 15pc gambling duty would wipe out half the
industry overnight." Unfortunately for Hawkswood, a 15pc gambling duty is
eactly what the 2007 Budget delivered up, alongside a new top rate of 50%
for casinos.