Re: UK Remote Gambling consult - help me & you
Today is the deadline for submissions to this consultation. Here is my stab at it: sent to remotegamblingconsultation @ hmtreasury.gsi.gov.uk
I am responding to this consultation as an individual. I play online poker recreationally and am not a professional poker player. I will not be responding to all questions but will comment on those that I believe may affect me or result in unintended consequences for those who play online poker. I am happy for my input to be published but would like my name, email address and home address to remain confidential *+++++*
Question 2: What, if any, specific gambling products (other than those discussed in this consultation document) need special consideration in regards to a move to a place of consumption basis of taxation?
Poker has specific considerations that do not seem to be fully addressed by the consultation.
In section 3.20 of the consultation you say “For person to person games, such as poker, the basis of remote gaming duty will be the amount that is paid by people in the UK as entitlement to use facilities. For example, where a payment is made to a provider of facilities from a centrally held ‘pot’, the provider of facilities will be liable to duty on the proportion of the payment due from customers in the UK. Where a payment is made from an individual player (e.g. the winning player) the provider will be liable to duty if that player is in the UK.”
This approach is relatively simple to apply to tournaments where an entry fee is charged from each player. The concern here for UK based players would be if the charge differed by country. The tax due from the site should not be passed directly to the player via a higher charge. Sites should not be allowed to discriminate between players from different countries in terms of charges levied transferring the tax directly to UK poker players. Similar concerns of potential higher charges would apply to other peer to peer gambling such as betting exchanges. Additional UK fees should not be allowed as they would be discriminating between participants and a mere transfer of the tax to the players.
The proposed approach for cash games is even more problematic. The assumption made is that the rake is paid by the winning player. Whilst this is one view of rake it is the wrong view to take for taxation purposes. Introducing differentiated tax rates for the sites and charging based upon who won the pot would introduce a perverse incentive for the site with players from lower tax locations proving to be more profitable if they win. This would end the peer to peer basis for trusting the site to be impartial regarding outcome by giving them a financial interest in the result of the pot. More broadly it would provide an incentive for sites to target losing UK based players and reject or not market themselves to more successful UK players. Sites often provide educational materials or sponsor TV shows allowing players to increase their level of skill at poker. By making bad players more profitable the incentive introduced would be to limit UK players access to educational materials, sponsorships and events.
The way to avoid the perverse incentive of charging tax on winning pots is to charge the tax based upon contributed rake. If the player put $10 into the pot the tax should be based upon the rake due on the $10 contribution. The rake taken for every pot would thus be split between all participating players and crucially removes any differential in profitability for the site based upon the outcome of the pot. This measure is already used by many sites for their player incentive schemes and so is already known to be practicable as a way of accounting for rake charges between players.
Online poker often includes a level of rebate via promotional schemes of part of the rake played. This is either directly in rakeback – cash paid to the player or takes the form of valuable points which can be exchanged for cash, used to purchase products or used to pay for entry to events or tournaments. The taxation system proposed should make allowance for this rebate of the rake to players so that monies/goods returned to players via the promotional schemes are not subject to the gross revenue tax as this would penalise players and discourage competition between sites based upon their rakeback offers or “VIP” style points based promotional schemes.
Question 3: Other countries have moved, or are considering moving, to taxing remote gambling on a place of consumption basis. What, if any, lessons from your experience in providing remote gambling to customers in other countries should the UK take into account?
Playing poker online online either recreational or professionally is greatly enhanced by access to the largest possible player pool. With large multi table tournaments (MTTs) involving many thousands of players this is most obvious as the total entrant numbers provide the larger potential prize pool and create the particular enjoyment and opportunity to use skill to navigate a large field. These fields are dependent upon an international player pool which has been reduced of late by countries like Italy and France restricting play to those from their own country in order to be able to tax players from their jurisdictions. Any such approach would be very detrimental to poker players in the UK not just for MTTs but also for cash games or small Sit and Go (SnG) tournaments. Cash and SnG play depends upon a large player pool in order to allow the consumer to choose the level of play they wish to participate in whether this is for pennies or pounds – all of the games rely upon the availability of other players wishing to participate at the same level at the same time. International fields make this availability of games much easier for players especially at times in the UK when few UK players would traditionally be available to play.
Care should be taken to retain international player pools for poker, unlike others introducing taxation based upon consumption location (via restricting player participation) such as France or Italy.
Question 4: It is proposed that operators will have to take reasonable steps to determine the location of their customers. (i) Do you agree with a ‘reasonableness test’ approach? If not, what alternative solutions would you propose? (ii) Are there any products for which an operator would be unable to make a reasonable attempt to determine whether the customer was in the UK or where it would be unclear when a bet was made or when the facilities were used?
It seems entirely reasonable to expect providers to know their customer including identifying their home address and use of a UK based IP address. Using geolocation technology seems to me to be excessive in terms of intrusion upon civil liberties. participating in a game such as poker may take many hours to complete, especially for large tournaments. Having sites monitor the precise location of participants for tax reasons during these extended sessions with the precision of geolocation is not reasonable.
It should be possible to rely upon the self declaration of players and the sites know your customer requirements but only if no financial incentive to deceive is introduced to players via this change in legislation. Sites should not be allowed to charge UK based players a differentiated rate compared to other countries in order to cover their tax liability. Allowing such a differentiation which for poker might be a higher rake or tournament charge would provide an incentive to deceive the sites regarding the player’s location with relatively easy mechanisms such as IP spoofing providing a mechanism to sustain the deception.
It seems to me that the consultation has taken an overly strict definition of the consumption location. Applying this to every transaction seems excessive when applying the tax to UK residents would be simpler to administer and avoid the need for real time tracking of players location. There would also be anomalies possible if each transaction is the measure used. For example if a participant places a wager on a sporting event is the location determined by where they are placing the bet or where they are when the event takes place? For poker if I were playing on the Eurostar via wifi with the tournament starting in France but only finishing in the UK how would the strict definition of location apply? It would be far easier to consider the consumption location to be the players home address and allow participation whilst on holiday or abroad on business to be a continuation of activity at their normal location. This would be easier for sites, players and the revenue.
Question 20: It is envisaged that operators based in jurisdictions without reciprocal debt collection arrangements with the UK will be able to appoint an administrative representative in the UK and deposit a security rather than appointing a jointly and severally liable fiscal representative. Would you expect to take advantage of the facility to appoint an administrative representative?
Requiring gambling sites to make a cash deposit designed to protect HMRC is potentially damaging and dangerous to players. Not all sites strictly segregate player accounts from their own funds (they should be forced to). Having a site use player deposits as a guarantee for HMRC would place player funds at greater risk even if HMRC were to be better protected by having direct access to players money in the event of site failure or non payment of taxes due. Any such ability to place a cash deposit should be dependent upon proof that player funds are fully segregated and that the funds deposited are not player monies.