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 Stephen Burgen in Barcelona |
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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 other businesses. Online 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. But 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 a decade. 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. Norbert 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 protection". 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 the Rock. |
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