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|Rock of wages: online gaming keeps Gibraltar's residents at
|Stephen Burgen in Barcelona
There is no strip and not much neon, but
Gibraltar's gambler-friendly laws and tax regimes are turning it into a virtual
Las Vegas. The Rock has always had an eye for business that is not entirely
mainstream, whether smuggling cigarettes or serving as a tax haven, but in
online gambling it has hit the jackpot.
The industry employs 2,000 people , or 12% of the
workforce, and has helped to insulate the local economy against Spain's harsh
economic climate. Of 30,000 residents, only 600 people are unemployed. Across
the border in La Línea de la Concepción, some 10,000 of the
65,000 inhabitants are out of work.
The low-tax regime attracts the
industry but even so last year the government pocketed 12.4m
(£10.5m) in online gambling taxes. Next year the Rock will receive 10
times as much when the gaming concerns are brought into the same tax regime as
companies pay 1% tax with a ceiling of 500,000 a year. Although this is
rising to 10%, companies will still not pay any VAT, which means the tax regime
will remain attractive. "Nobody will leave, although we'll all complain about
the tax going up," Victor Chandler, chairman of the gambling company Victor
Chandler International and one of the first to move to the Rock in 1998, told
El País newspaper.
The tax rise is part of the Gibraltar
government's strategy to conform with European law. Peter Caruana, Gibraltar's
first minister, said: "To comply with EU law we must phase out the tax-exempt
company in 2010.
"However, in order to sustain our successful economic
model we must retain a commitment to a very competitive corporate tax model."
Keeping online betting on the Rock will be important. PartyGaming, one
of the 20 or so Gibraltar-based firms, reported profits up by 27% to $127m
(£82m) in the first quarter of this year. As well as the big names in
online gambling such as PartyGaming and bwin, British bookmakers such as
Ladbrokes and William Hill have also set up offshore operations in Gibraltar.
In 2001 they agreed with the British government to move their web operations
back to Britain in return for the abolition of the 9p levy on bets.
the temptation was too great and by last year William Hill and Ladbrokes had
decamped to Gibraltar. Ralph Topping, chief executive of William Hill, said
that, while British-based web operations paid a 15% gross profits tax and a 10%
racing industry levy, offshore operators paid as little as 1.5% in tax.
Others are strengthening their ties. Bwin, the Austrian online gaming
company that sponsors Real Madrid football club, is said to be interested in
buying a stake in Spain's national lottery, which is selling a 30% stake to
raise 5bn. The lottery was introduced in 1812 to offset Spaniards'
reluctance to pay taxes and the annual Christmas lottery, known as El Gordo
(the fat one), is expected to pay out 2.32bn in prizes on Wednesday.
Spain has yet to introduce legislation on internet gambling, although
it is in the pipeline. An estimated 200,000 Spaniards bet 575m online in
2009. Unless they are honest enough to declare them, they pay no taxes on their
winnings. Whatever its qualms, Madrid, desperate for new revenue streams, may
find the riches from legalised, taxed online gambling hard to resist. Even in
the United States, Congress is considering legalising the activity, which it
banned in 2006. A new bill proposes licensing and regulating internet gambling
operations, while allowing the Internal Revenue Service to impose taxes on
them. Winnings by individuals would also be taxed, in line with other gambling
winnings. Backers of the bill claim the taxes could yield as much as $42bn over
However, while less headline grabbing than drugs, gambling
addiction is a major social problem. Anyone can gamble at home without risk of
exposure, or at least as long as they can keep their shirt.
Teufelberger, chief executive of bwin, argues that "effectively preventing
gaming addiction can be achieved only by a licensing model in which the
granting of licenses is linked to compliance with suitable standards of gambler
It might not be too long before civil servants in
Whitehall consider crafting a statement along the same lines as the
cash-strapped British government hungrily eyes all the revenue it is losing to