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Tote's online casino finds tax haven 27/12/2007
Simon Bowers

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 Sport.

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.