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NEWS Britain: a friendlier regime?


Buried in dry-as-dust proposals for a tax overhaul are signs that the ruling coalition favours gaming


If the mere mention of tax reform would normally make you turn the page pronto – this time, don’t. Because while new rules on slots proposed for Britain’s casinos may seem like just another way of emptying businesses’ pockets and filling the government’s with the spoils, deep amid the technicalities are hints of two important trends. First, a recognition that gaming is gaming is gaming, and that there’s no need to treat slots as weird, not-quite- British phenomena that, like dangerous animals, require a special licence. And second, an implied acceptance that gaming is not (as much British legislation might historically have led you to believe) an arcane and cultish practice but a business like any other, and deserves to be taxed like any other: that is, on profits. Here, then, are the facts of the matter. In its second sweeping change to British gaming regulation in a period of weeks, the government announced that it would abolish Amusement Machine Licence Duty (AMLD), the flat-rate fee paid by operators of gaming machines such as slots, and replace it with a tax based on profits. As a result, Whitehall says, struggling operators may end up paying less tax than currently, while the more efficient could face a bigger bill. It is also extending the value-added tax (VAT) exemption


that currently applies to most forms of gambling and betting to gaming machines, meaning that there will no longer be a VAT element in stakes that has to be repaid to HM Revenue & Customs. The new tax on profits, known as Machine Games Duty (MGD), will be levied at two rates – one applying to Category A, B and C machines, which account for the majority of units, and a lesser rate imposed on the low- stakes, low-payouts Category D devices as well as some products which are not currently classified as gaming machines. However, the lower rate is unlikely to impact casinos, which mostly use Category A and B machines. The exact rates have not yet been revealed, but it has been confirmed that they will be calculated as a percentage of gross gaming revenue, in other words stakes minus payouts. Other expenses associated with the operation of machines will not be deductible from the gross revenue.


The new tax will not be implemented for at least a year after the passing of the Finance Bill 2011, and is therefore unlikely to be in force until mid-2012 at the earliest. The VAT exemption could come into play sooner. Eyes glazing over yet? Right: here’s what it means. This dramatic change in the tax treatment of gaming comes just weeks after the Department of Culture, Media and Sport pledged to double the maximum stake on Category B3 gaming machines and allow some operators to offer more units at each location. While the intention of that liberalisation was apparently to help the amusements


6 JANUARY 2011


sector, rather than casinos, it appears to signal that Westminster’s Conservative-Liberal Democrat coalition is a markedly more gaming-friendly government than Gordon Brown’s. “A gross profits tax will improve the future predictability and sustainability of the tax regime by making it more resilient to technological progress, regulatory changes and inflation,” the government said.


The coalition also “believes that exempting gaming machines from VAT will increase the stability of the tax regime, as gaming machines will then have the same VAT treatment as other gambling activities. Product developments are increasingly blurring the boundary between different forms of gambling. Equal VAT treatment will therefore be a more sustainable approach.” Enough civil-servant-speak already: what does the gaming industry think?


Struggling operators could pay less tax


The proposed new regime


was formulated after a 2009 consultation with gaming companies and industry bodies including the National Casino Industry Forum, Genting Casinos, Inspired Gaming Group and Rank Group. And the opinions of


Whitehall’s proposals expressed by the sector in that consultation reveal the likely impact of the changes. “Some respondents expressed concerns over the


precise rate of tax that would apply to their businesses,” according to HM Revenue & Customs. “Other respondents highlighted the economic uncertainty within the industry which could be exacerbated by tax reform as well as a general preference for retention of the status quo. Some respondents stated that a GPT regime ‘penalises efficient operators’ and would ‘distort the market’.” The official report on the consultation continues: “Many


respondents noted that a move to a gross profits tax would create ‘winners and losers’.” Indeed, the government admits that “on average, winners will be operators with less profitable machines and low VAT recovery rates”. Perhaps unsurprisingly, then, it seemed to generally be


the larger operators involved in the consultation that were less enchanted with the proposals. “Many large businesses that operate gaming machines in multiple locations noted that the revenue-neutral rate of tax under a gross profits tax system [that is, the rate which would mean they paid the same as they currently do with AMLD] varies across their businesses, and has varied considerably over time in some cases. Many respondents noted that they feel partially insulated from changes in tax in other gambling sectors under the current AMLD regime due to the different tax rates on machine categories.” The coalition’s new approach to gaming tax isn’t, then, unmitigated good news for everyone in the casino sector. But it does indicate a growing outbreak of logic where gaming regulation in the UK is concerned, and may well presage a lot more casino-friendly law-making.


INBRIEF


MOVING HOME Gaming technology supplier WMS has opened a new $11m, 53,000-square-foot office in Reno, Nevada, to house 80 staff including local sales and distribution teams, systems developers, and gaming operations workers. It brings together personnel who were previously housed in two leased buildings locally.


OK FOR RCD Regulatory authorities in the Philippines have approved Racing Card Derby’s table game, which will now be available to customers at the Resorts World Manila casino. Also expected to feature the game are the government-owned casinos operated by PAGCOR, the Philippine


Amusement and Gaming Corporation.


PRINT PARTNER FutureLogic, the printing specialist, is to remain a technology partner of Aristocrat Leisure. Its thermal printers will be the standard option for all TITO gaming systems that Aristocrat ships globally over the next two years. FutureLogic also recently signed up as a technology partner of International Game Technology (IGT).


TEST MATCH Gaming Laboratories International (GLI) is integrating its Australian operation with its global submissions process, allowing suppliers of gaming equipment to put forward their products for regulatory approval in that country in the same way as they submit applications in other territories where GLI operates. The firm has also been authorised to test systems for approval by authorities in Peru.


LE POKER US manufacturer PokerTek has been approved for operation in France, becoming the only supplier offering an electronic Poker table to the French market.


ONAROLL Nevada gaming revenues soared 11 per cent in October compared with the same period in 2009. It was the third consecutive month of year-on-year growth, prompting thoughts of recovery, and the Las Vegas Strip significantly outperformed off-Strip and non-Las Vegas properties with a 16 per cent hike in revenue.


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