Gibraltar’s point-of-consumption tax challenge falls short

The United Kingdom had announced their 15 percent point-of-consumption tax that would be implemented on all online gambling operators back in 2014, and Gibraltar submitted a legal challenge to it in order to get out of the tax. However, at this time it looks as if Gibraltar is going to lose their challenge which means that they will also be responsible for the new tax.

At the end of 2014, in December, in conjunction with the Finance Act was signed, which was a levy that would get applied to every remote gaming platform that was used by players that were based out of the UK. This angered the operators in Gibraltar because they had previously been given a 1% tax that was much lower than the new larger tax. No company wants to be charged more in taxes so that’s not surprising. This prompted the governing body of Gibraltar in charge of gaming and betting in order to file a legal challenge with the High Court of London, but they had decided to move the jurisdiction to the EU Court of Justice based in Luxembourg.

This levy is huge for bringing in tax money from online gambling services because more than 50% of the online platforms are based out of Gibraltar. The argument made by the country’s association for betting and gaming against it was that this new tax broke the EU laws and that it would not be applied in this case because it prevented Gibraltar from providing services across its own borders free of charge.

There has yet to be a ruling that has come out from the EU Court of Justice, and the decision is not expected to come for several months from now, but the Advocate General released an initial decision that does not look so promising. The unofficial decision states that both Gibraltar and the UK should be considered as a “single entity” and so it would not violate their ability to distribute services across their borders. This will not only impact the current levy on off-shore gambling services, but on all future levies and taxes placed on Gibraltar.

Gibraltar has been classified as a British Overseas Territory and has been governed by the UK since 1713. This changed back in 2006 when there was a reform that gave the island power over its own governing and allowed for them to have a parliament of elected individuals. London was to remain in control of defenses, foreign affairs, as well as general goods governance.

Even if the EU Court of Justice was to rule that stipulation that Gibraltar and the UK are free provide services and goods over their own borders does actually apply to them, it does not mean that it’s a clear road for fighting the levy. The next step would be to determine whether or not the Point of Consumption tax was actually a restriction, which would be passed back to the High Court to finalize a decision.

Although nothing is set in stone, it does look like the levy challenge is bound to fail.