Although the Place of Consumption (POC) Tax was just introduced last year, it could soon crumble into nothing. Yesterday, the High Court of England and Wales has ruled in favour of the Gibraltar Betting and Gaming Association (GBGA) which had challenged the tax, and has sent the tax to be ruled upon by the European Court of Justice. This means that the tax can possibly be ‘thrown out' as illegal and order the UK Gambling Commission to repay all of the tax it collected.
The POC Tax (in case you've forgotten)
Just a quick reminder: the POC tax was introduced last year, and in addition to requiring all casino operators and casino software providers that ‘sell' their services to UK residents to be licensed, it also brought taxation to their profits. Yet ever since the UK Gambling Commission started tightening its grip on mobile gambling by introducing the POC Tax, there has been rumbling in the industry associations and casinos themselves.
The High Court Ruling
The GBGA, represented by a legal firm Olswang, challenged the POC tax before it even came into effect, but was unsuccessful. However, it didn't give up and challenged the POC tax again in March and now it's efforts have paid off. The High Court – the court which has the highest jurisdictional powers in the entire UK – took its time deciding upon the legality of the POC tax, but finally reached a decision yesterday.
By referring the case to the European Court of Justice, the High Court has implied that the tax might not be entirely legal. One of the biggest points against the tax that the GBGA were keen to spell out, is that it is illegal for the UK to tax businesses that are outside of their normal jurisdiction. This would mean that the Gambling Commission were in no position to start collecting taxes from companies registered and operating abroad in the first place.
What's Comes Next?
We will eagerly await the decision by the European Court of Justice as it could deem POC tax illegal, forcing the UK Gambling Commission to return all of the license fees and taxes that it collected via the POC tax scheme. This could be a major blow to the agency itself, as it has recently announced that it collected £4 million pounds more in income thanks to the POC tax. It also reported that it managed to collect £2.8 million in operator application fees, up from just £350,000 the year before.
On the other hand, if the POC tax was thrown out, it would most certainly be welcomed by the industry. Not only would operators and developers get to keep all of their profits, but they also wouldn't need to exclusively use licensed software to cater to UK players. In any case, it will be interesting to follow the developments on this, so keep an eye on the articles in our regulations section of the site.