Totesport Casino, an internet arm of government-owned bookmaker the
Tote, is switching its operations to the offshore tax haven of Alderney in a
controversial move that will allow it to advertise freely in the UK while
avoiding UK tax and regulation.
The move will come as
an embarrassment for ministers who have sought to present the UK's approach to
online gaming regulation, set out in the Gambling Act 2005, as world-leading.
In practice, the industry has boycotted the UK regime.
At a conference
of international regulators held at Ascot last year, Peter Dean, chairman of
the government's new Gambling Commission, said: "Everybody who offers gambling
in Britain will be required to be licensed by us [from September 2007]."
But when the September deadline
came, none of the leading poker and casino operators took up a UK licence. They
said they had been forced to boycott the UK because Gordon Brown, in one of his
final moves as chancellor, had set a prohibitively high 15% "remote gaming
duty," the tax on online poker and casinos.
One operator called the tax
"a joke," insisting the industry would continue to target UK punters from
offshore bases where they pay little or no tax.
The UK is believed to
be the biggest legal market for online poker and casinos in the world after
ministers chose to try to regulate rather than restrict the new industry. In
September, the Gambling Act greatly liberalised advertising restrictions on
gambling groups, regardless of whether or not they held a UK licence.
Other governments have moved to frustrate unlicensed internet groups
and last year the US - then the largest online poker and casino market - drove
most operators out of the country after passing tough legislation targeting
payments for online gambling.
A spokesman for the Tote, which is about
to be privatised, said the decision to switch its online casino operations from
Curacao to Alderney had been taken in order to allow Totesport Casino to
advertise freely in the UK, in particular permitting it to sponsor horseracing
events. Curacao-licensed operators do not qualify for UK advertising freedoms.
Asked why the Tote had not sought a licence from the UK Gambling
Commission, he confirmed Alderney offered lower costs, particularly when it
came to tax.
The spokesman said the decision to relocate to Alderney
had been taken in full consultation with the Department for Culture, Media and
A spokesman for the DCMS said: "This is a business decision for
the Tote. The Tote is run as a business."
The government has been
trying to privatise the Tote for about seven years but early efforts were
blocked in Europe because they breached rules on state aid. Tote management,
under chief executive Trevor Beaumont and backed by a consortium of race track
and horse owners, is believed to be in the final stages of negotiating an
alternative sell-off plan.