What is POC Tax in the UK?

| Jan 15, 2020

Last Updated on by

Online casinos pay hefty taxes and local governments get a lot of money to state coffers from gambling-related activities. The legislation differs across the globe and casinos pay different amounts based on where they have the headquarters and the country where they operate. In the United Kingdom, casinos are strictly regulated and those who apply for a license here, are some of the most respectable operators. In addition to having to deal with the high regulatory standards, casinos are also subject to different taxes, with the latest going by the name of point of consumption tax.

What is the Point of Consumption Tax?

POC is an acronym that stands for point of consumption and it is a tax imposed on online gambling ventures by the British government. In 2005, the Gambling Act brought sweeping changes to the online gaming environment and it was only amended in 2014. This is when the point of consumption tax was introduced and it is charged on the revenue earned by casinos catering for the UK audience. It starts at 15% and can go up much higher and it is applied even to operators who have the headquarters elsewhere.

The point of consumption tax generated mixed reactions, because it was the first to also target casinos listed on sites like topsportsbetting.com and were based in other countries. Since the vast majority of the UK facing casinos and bookmakers were actually operated by British ventures, the government had no problem in enforcing it. However, most of these casinos had the headquarters in Gibraltar, Malta, the Isle of Man and other countries, where they were subject to lower fees. For many operators who were using overseas addresses for the sake of cutting down on taxes paid, the POC tax caused serious problems and hiked their spending.

The introduction of the point of consumption tax was added through an amendment, in spite of opposition from casinos. The authorities stated that the tax must be charged in real-time as the games are played, so there was no way for the casinos to circumvent their fiscal obligations. Operators who had the head office in other countries suddenly faced a new challenge caused by the fact that they had to pay taxes twice. The side effect of the tax was that some casinos found it worthwhile to relocate back to the UK.

Unintended Side Effects for Players

The government’s main goal was to generate more revenue for the budget, while taxing operators that were before beyond its reach. Previously, bookmakers and casinos paid a percentage of their turnover, so it made no difference how much profit they make. The main reason why the authorities decided to introduce the point of consumption tax is that many operators didn’t pay anything. By choosing to either allocate or establish their businesses elsewhere, they paid all their taxes to foreign governments.

Both bookmakers and casinos warned that if the point of consumption tax was to be added, their costs would surge and negative consequences would arise. Players were the first to feel the negative effects, since the loyalty programs were hit hard and many promotions were removed. The reason for why this happened is that the gambling operators tried to cut down on costs however they could. Instead of rewarding loyalty and going to great lengths to keep players satisfied, they had to reduce the bonuses and financial incentives. Some bookies even chose to shrink the odds, so players won less on winning bets.

In other cases, casinos and bookmakers have increased their fees for deposits and withdrawals. All sorts of financial instruments were used to tip the balance back, but ultimately these fixes backfired badly. Punters lost interest in playing at those bookmakers and casinos and simply took their business elsewhere.

With the UK government showing no intention to eliminate the point of consumption tax, casinos realized that they had one more difficult choice to make. Some decided to move their business back to the UK, so at least they won’t be subject to the negative effects of double taxation. Others decided that it would be for the better to simply leave the UK market altogether and no longer cater for British players.

Charles Baxendale

A keen researcher in the development of methods and theories for computer sciences. A lover of algorithms and mathematical computation. Consultant to online slots software companies and a player in my spare time.

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