For They Are Two but One: Gibraltar Dealt Uppercut in UK Tax Challenge

Lee R. - January 23, 2017

The EU Advocate General has refused to recognize the Gibraltar gaming authority’s right to full protection.

Gibraltar has suffered a potentially fatal setback in its ongoing legal battle against a key EU tax.   

UK Tax Touches All

The Gibraltar Betting and Gaming Association has been contesting a requirement introduced by the UK government of the Gambling (Licensing and Advertising) Act in 2014 for UK-facing operators of online poker sites, online casinos and online sportsbooks to acquire a UK license before continuing to provide any more service to online gamblers in the UK.

Tax Ticking Gibraltar

The new licensing conditions called for remote (foreign UK-facing) operators from all over the world to pay a 15% “Point of Consumption” tax on the proceeds of gambling transactions with UK residents, including those with the least restrictive iGaming markets such as in the Isle of Man and Gibraltar. 

Reducing Appeal

Favourable tax rates in Gibraltar originally attracted the likes of 888Poker, Party Poker, Ladbrokes Poker and William Hill Poker to base operations out of Gibraltar, making them all members of the GBGA.     

Invoking Right to Protection

The GBGA launched its legal challenge against the new Act on the basis that the Act was in conflict with EU member states free trade laws.

The EU Process

After a rejection and then successful appeal, the EU process calls for a final review before the European Court of Justice hears the case--from an Advocate General.  Though not binding, the Advocate General’s review of the merits of the case provides what amounts to a recommended verdict to the EU court. 

Part of the UK

And the finding of Advocate General Maciej Szpunar in the GBGA case is this: as a dependent territory of the United Kingdom, regardless of the legal merits of effectiveness of the GBGA argument, Gibraltar is not even a full member of the EU.

The Trial Prospects

The GBGA´s challenge still will be heard by the European Union Courts of Justice, but absent recognition of full EU member state status, convincing EU judges that Gibraltar should be included in any EU free trade protections for participating states is going to be a tough sell.

Fun While It Lasted

The GBGA may ultimately have to just grin and bear it, so the tax breaks all members have enjoyed looks close to being reduced substantially if not eliminated altogether as an outcrop of the greater EU consolidation.

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