Gambling organizations have historically always been under a great deal more scrutiny than most other industries. It may not have escaped your notice that there are a lot of betting companies based in Gibraltar. This is commonly covered by media and the news. But why exactly is it the case? Why should betting companies that operate in the UK or even all over the world be based in this tiny region at the bottom of the Iberian Peninsula?
Today, we’re going to answer that question and more. Let’s look at the main reasons for this.
1- Easier set up
On the one hand, getting set up as a gambling company in Gibraltar is just a lot easier than it is in the mainland UK. The gambling sector contributed around 25% to GDP, so the government wants to encourage people to set up these companies.
To set up a gambling business based in Gibraltar, the Gaming Regulator will give a license for offering these services based on a presentation of a sound business model. Due diligence is done on the major shareholders as well as on the board of directors, but once that’s handled, organisations can start offering services in record time.
Setting up a gambling business purely through the authorities in the mainland UK can take a good deal longer, and involve a lot more hassle.
Without doubt, the number one reason that there are so many betting companies based in Gibraltar is the local tax laws. In a whole host of areas, companies based in Gibraltar will pay far less tax than those based with tax authorities in the UK mainland.
Corporate tax rate is one of the most attractive features of Gibraltar tax law. Whereas mainland UK corporate tax rate is 19%, in Gibraltar, it is only 10%. The same is true with their PAYE. There is no capital gains tax whatsoever, nor is there any VAT.
Roughly 75% of all UK betting takes place from Gibraltar. Companies see the enormous amounts of money they can save through local tax laws, so it’s really a no-brainer to be set up in a “tax haven”. Of course, this does mean enormous amounts of tax revenue are lost to the UK’s treasury each year, so while it’s great for the gambling companies, these loopholes could come under greater scrutiny in the years to come.
There are many peripheral benefits to the money that companies can save through tax savings, too. For one, companies have a great deal more extra money to spend on advertising. Advertising, though it too has always been a point of keen scrutiny in gambling, is a central part of any gambling company’s strategy.
With extra money for advertising, they can attract more customers, and can attract those customers to bet more money. Take a look at the list of betting sites at Topbettingsites.ie and you’ll see that a large number of bookmakers are headquartered for this reason in Gibraltar. At the height, gambling companies have spent around £10 million a week on gambling advertising. Though it’s a bit lower now, on average around £7.6 million per week, it’s still a pretty staggering amount.
Every penny that they can free up for their advertising campaigns ultimately makes them more money.
4- Feedback loop
Finally, Gibraltar, and other similar provinces like Malta, create a feedback loop in which companies see others flocking to one place and so simply follow the leader, to an extent. As more and more companies base themselves in Gibraltar, there is a greater sense that it must be an advantageous move.
Furthermore, the more companies you have registered there, the more the local talent pool grows. This, further, attracts yet more companies to set up shop there, and thus you have a continuous feedback loop. Companies will go where the money is, and since they’re operating overseas from Gibraltar, they aren’t competing with one another.
So, simply put, it’s mostly about the money. Companies can save a huge amount of money by setting up shop in Gibraltar, through income tax, yield, PAYE, corporation tax—just about every area of their finances. While this loophole isn’t exactly great for the UK’s tax revenue, it’s easy to see why companies do it. Their goal is to protect and increase their profits, after all.