On June 23 in 2016 the now memorable referendum took place whereby the people of Britain voted, by a small margin, to leave the European Union. The implications of this vote will be seen for years to come. What effect, if any at all, will Brexit have on online bingo sites?
Regulations on Bingo Sites
Currently, there is no European-wide licensing authority for online gambling. Every UK-based gambling site has a requirement to hold a UK license, so this won’t change.
This part is assuming the UK stays intact itself and does not fracture due to Scottish independence of Irish reunification. But, until Brexit is complete then the UK must comply with the European Union’s Fourth Money Laundering Directive.
Any online bingo sites with players from EU locations like Sweden will also have to continue complying, after that. This is the first directive of its kind to apply to online gaming and was required to be enacted by June of 2017.
Unless you’re a high roller who spends tens of thousands of pounds (or above), you’re unlikely to feel any noticeable effect.
Taxes for Online Bingo
The exact tax that applies to online gambling money is the UK Point of Consumption Tax. It’s nothing to do with EU tax rules, but, and this is a huge but, there are taxes that online bingo operators do have to pay, like corporation tax and VAT.
Chancellor of the Exchequer at the time, George Osborne, said corporation tax might be reduced to help businesses in the UK. It would benefit businesses in general. But it’s possible the Treasury may see online gambling as an easy target for grabbing some tax revenue. This could then increase the tax burden on the whole industry.
In the past, operators have avoided some of this tax burden by basing themselves in other jurisdictions. That brings us nicely onto the next consideration.
As an overseas British territory, Gibraltar has, for many years, been a key base for UK operators including some of the best names on the market. Dragonfish, for example, have their servers located there.
Remote gambling totals about a fifth of the local economy there. 30,000 people live there and thousands more in Spain, who commute across the border every day. This is great for Spain and Gibraltar as it improves employment in an area of Spain that experiences an unemployment rate of 40% in some areas.
Spain has had sovereignty over Gibraltar for many years and the ink wasn’t even dry on the ballot papers before it was calling for joint control again.
Brexit and Gibraltar
The issue with Brexit and Gibraltar is that the Spanish border at the moment is fairly open due to the UK’s EU membership. Post-Brexit, living in one country and working in another would be much more difficult, even impossible.
If Gibraltar ended up part of Spain, however, it would be bad for UK operators. Spain carries a different and much more strict licensing regime. It allows Spanish sites using the .es domain to operate within specific borders. By giving Spain control, it could kill the industry!
It will take some time to see the clear effect Brexit will have on Gibraltar. A similar but less severe problem to that of the border issue between the Republic and Northern Ireland. The solution will eventually become apparent. But whatever that solution is, it’s bound to have a financial impact on operators who have a presence in Gibraltar.
The Effects on Online Gaming
It’s difficult to see a way forward that won’t have them shouldering the significant tax increase or moving somewhere else, Malta, for example. If no one goes out of business, the player could still be passed on the cost of increased tax and they could see fewer bonuses or a reduced RTP rate.
The residents of Gibraltar voted with an overwhelming response to remain within the EU. More than 95% of them voted to remain. Three days following the vote, the territory’s chief minister spoke with Nicola Sturgeon about how Gibraltar and Scotland might work together. Perhaps with other areas of the UK who had voted to remain and preserve the advantages of an EU membership.
This might facilitate Scotland becoming independent and taking Gibraltar with it, and continue the UK’s EU membership.
Future Legislation for Bingo
There isn’t a procedure or legislation for such a thing and no one knows what might happen to the UK Gambling Commission if it did. The major percentage of players using UK bingo sites are from south of the border. There are only about 5m people in Scotland altogether, which is less than a 10th of the total UK population.
A potential scenario could see operators downsizing their operations in Gibraltar. They could then bring them back to the UK mainland. Especially so if the corporation tax reduction happens, as this would leave the UK in a position of being a tax haven.
The effects players would see are little to none. It’d still be beneficial for the local economy in places like Sunderland, where the Tombola HQ resides, or Stoke-on-Trent, home of Bet365. In May 2017, Paddy Power Betfair gave notice of closure for their Gibraltar office and said in no uncertain terms it was not a result of Brexit.
The one thing that seems clear about Gibraltar is the lengthy period of time ahead that will remain uncertain. This is regardless of government reassurances from Gibraltar itself.
Freedom of Movement
Depending on what shape Brexit takes, this could be a huge problem for iGaming operators and not solely because of the Gibraltar issue. Almost all types of Brexit possible would see UK residents losing the right to free movement and working in EU countries. This includes Malta.
There are over 5,000 British expats living there at the moment. Over 1% of the total population. A lot of people work in the blooming iGaming and bingo sector. Malta operators would find it almost impossible to hire a UK national. Those with businesses attached, like software consultancies, wouldn’t be able to base themselves there either.
In the instance of a hard Brexit, some, or all UK nationals who already live and work on the island could be forced to leave.
The outlook at the moment for all online bingo sites with a presence in Gibraltar is unclear. It still all depends on what type of Brexit. The worse-case-scenario of a no-deal or hard Brexit has been up for discussion. This will harshly impact the local communities as well as the industry as a whole.
If the borders aren’t closed and operators don’t pass on heavy tax burdens to their players, everyone could expect to continue playing the games they love most at little to no adverse effect on online bingo thanks to Brexit.