Online Casinos Hit Hard by British Tax Increases

Internet gaming companies had fought hard to get the VAT removed, but now they say the new level of tax on gross profits will hurt as much or more.

British online gambling operators were stunned this week by government plans to substitute an increase in gross profits tax to replace the controversial value-added tax. Internet gaming companies had fought hard to get the VAT removed, but now they say the new level of tax on gross profits will hurt as much or more.

The new plan especially affects online bingo rooms, as tax will increase from 15 percent to 22 percent on bingo. Slots and other gaming machines will see a 9 percent increase in tax, and casino poker rooms will face a new tax.

Rank Gaming Group, the UK's largest Bingo operator, saw stock shares plummet by more than 10 percent at the news. Rank also operates gaming machines and poker rooms, leaving it hit hard by all three tax adjustments.

"I do not understand what the British bingo industry has done to justify the government's vindictiveness," said Rank CEO Ian Burke.

Rank officials say the changes could cost them as much as $13 million annually, almost a quarter of its expected $55 million gross profit.

Bingo operators felt UK taxation was discriminatory because they had to pay a gaming tax as well as the VAT. Removing the VAT was supposed to give them an even competitive playing field with other gambling forms, but the stiff new taxes will offset the gains.