Betfair Exits UK Gaming Market
The latest internet casino to leave the United Kingdom because of its exorbitant 15% gross profit tax rate is Betfair. It has decided to move offshore and will save approximately £20m per annum, during its third quarter result this morning its chief executive made this announcement.
As of tomorrow Betfair will be operating under a Gibraltar gaming licence following in its rivals’ footsteps the likes of Ladbrokes and William Hill. Both these gambling operators recently publicized by exiting the UK market a few years ago they saved millions of pounds.
David Yu who is the CEO of Betfair made no secret to move Betfair’s operation abroad. It opened in October last year a new Dublin office to house its data centre and telebetting internet casinos. Back then it already warned the UK government to lower its tax rates on horseracing and various other internet casinos. The UK government is busy scrutinising its current tax system but has not announced any reforms as yet. Betfair’s decision to exit the UK market might just be the final straw to have broken the camel’s back.
In 2010 Betfair paid £6.1m in payments and another £1.25m voluntary payment as a result of its overseas players wagering on horseracing. At the time Tessa Murray, director of corporate communications at Betfair, notified Cassaon-casino the company has no plans to “relocate offshore”.
Yu said the last couple of months Betfair transferred the majority of its key systems from the UK to Gibraltar and Dublin employing more than 120 staff. He said the move to relocate will enable and equip the company to properly exploit their new locations and at the same time deliver proper customer service to their players as well as to compete on a level basis in the UK market”.
Certain experts expressed their concern about the wisdom of Betfair’s continued methods of contributing to the horseracing industry. With suggestions existing goodwill or lack thereof within the industry might make sponsorship a more beneficial option than perpetual tax contributions. Yu stated that the internet casino will continue to negotiations with the racing board before settling on the most convenient method about contributing to the industry.
“Making contributions to racing is in our best interest as well and we will explore all avenues available to us. We need racing to do well in essence it’s good for our business.”
Its operational expenses will increase in the short term Betfair said as a result of running new existing data centres, however it will also reduce its systems consolidation programme which will be finalised at the end of 2012. As a result Betfair would save in taxes as much as £20m per annum and £10m of underlying earnings.
The internet casino said it continues to be incorporated in the UK and employ 1,200 people at its headquarters in Hammersmith in London and at its other offices in Stevenage and Halifax.
In 2010 Betfair became a listed Company on the London stock exchange in October placing an estimated value of more than £1bn on the internet casinos. Shares first traded at 1300 pence and increased to 1610, since then the price slumped over fears of increased regulation in the industry. At 887.5 pence the shares closed yesterday, valuing the internet casino at £954m.[addtoany]