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UK gambling tax puts us at disadvantage, says Betfair 05/08/2009
Simon Bowers

Betting exchange group Betfair, Britain's largest online betting business, has become the latest bookmaker to publicly attack the Treasury's online gambling tax rates and refused to rule out a move offshore.

The privately owned firm, one of Britain's most successful internet startup companies, issued a thinly veiled threat to move its UK business to Malta should the competitive disadvantage of paying tax in Britain worsen.

The chief executive, David Yu, said Betfair, which already channels almost all of its non-UK business through low-tax operations in Malta, remained committed to the UK and had no plans "at the moment" to move.

Of the Treasury's 15% betting tax on profits, he said: "It is not ideal. It does put us at a competitive disadvantage." He declined to rule out abandoning the UK at some stage in the future, though he said the company was "very proud" of its achievements as a British business.

Yu's comments came after William Hill yesterday confirmed it is moving its online business to Gibraltar, shattering a 2001 "gentleman's agreement" with the Treasury not to do so. Ladbrokes is expected to respond with a similar move, possibly announced as soon as tomorrow when it delivers half-year results.

Ladbrokes, William Hill and Betfair already operate UK-targeted gaming websites, offering poker and online slot machines, from offshore tax havens – as does government-owned bookmaker the Tote.

An exodus of online betting operations will make a mockery of Labour's efforts to establish Britain as a global centre for gambling companies and regulation. Already higher tax levels mean no online poker or casino business operates in the UK under a licence from the Gambling Commission.

The departure of sports betting firms will leave the UK's entire online gambling market – the largest legal betting market in the world – beyond the scope of both the Gambling Commission and the Treasury. Meanwhile, the government two years ago introduced some of the most liberal laws on gambling advertising anywhere in the world.

Betfair published limited financial figures for the year to 30 April showing top-line operating profit up 29% to £72m, despite a heavy investment programme. Revenues have doubled in three years to £303m and the company has net cash of £133m. Much of last year's growth came from outside the UK.

The group's core UK sports betting exchange continued to show double digit growth during the year, said finance director Stephen Morana. The performance is in contrast to William Hill, which yesterday issued a mild profits warning, blaming a poor run of luck on flat racing and football results.

The exchange model, which "matches" rather than "takes" bets, means the company is never exposed to sporting results. Betting exchanges work like stock exchanges, matching buyers and sellers of fixed odds wagers.

Betfair said it was matching an average of 6.4m transactions in real time every day – more than every stockmarket in Europe.

Ladbrokes is shifting its online gambling arm to Gibraltar in a move that will cost the UK Treasury millions of pounds. Chief executive, Christopher Bell, blamed "intense competitive pressures" for the decision, which industry experts had already said was inevitable following William Hill's move on Tuesday.