Offshore: Keluaran Sgp Betting on the Isle

Online gambling is a major growth area for a number of offshore financial centres, and following the WTO’s decision in the dispute between the US and Antigua & Barbuda, it is likely to become an even more popular source of business. Miles Benham reports on how this industry is being supported on the Isle of Man

The Isle of Man is one of the birthplaces of regulated online gambling. On the island, operators can obtain licences to conduct a variety of forms of gambling over the internet or by telephone. Bookmaking, casino games and poker are the most popular forms of online gambling.

The main factors to consider in choosing a jurisdiction from which to operate an online gambling site are its legislative framework and regulations, duty and taxation, bandwidth and infrastructure.

The Isle of Man has built its reputation on a strong regulatory Keluaran Sgpenvironment. In recent years, one of the best examples of its innovative legislation is the Online Gambling Regulation Act 2001 — which legalised online gaming and, in particular, online casino gaming and poker.

The Act creates a regulated environment to allow licensed online gambling to take place. Licences are only granted to Isle of Man companies, and the companies must have a real presence on the island. One means of regulatory control is the requirement for the licence holder to have an Isle of Man-based designated official who has been approved by the island’s Gambling Control Commissioners.

The Act is supported by a raft of statutory documents that set out the regulatory system in detail — for example, the computer software running the games has to be independently tested and, once passed, the core operating system cannot be altered without the approval of the commissioners.

Strict anti-money laundering provisions apply, and the operator is required to obtain proof of the player’s identity. Various means of player protection, including the prevention of underage gambling, are set out in the regulations, which are enforced through inspections by a body of gambling inspectors.

The end result is the creation of a regulated environment. This protects players — but also the operators and the island by greatly reducing the risk of undesirable activity taking place.

Bookmaking has its own legislation in the form of the Gaming, Betting and Lotteries Act 1988, which licences two forms of bookmakers’ licence — the public betting office licence and a restricted betting office licence.

A public betting office licence not only allows a licence-holder to operate a public bookmakers shop, it also permits internet and telephone bookmaking with persons on the Isle of Man or in the UK. The Restricted Betting Office licence only allows bets with persons who are outside the island and the UK. Internet operators will often obtain both licences, which have their own individual rates of duty.

In December 2004, the Isle of Man’s Council of Ministers agreed to change their prior policy and to allow online casino and poker sites to take bets from persons in the US. At the same time, they indicated that they would not wish bookmakers to take bets from the US. The reasoning behind this is that US legal opinion, while sometimes divided on the issue, generally indicates that online gaming is legal, whereas online book-making is prohibited by the Wire Act.

It is likely that the restriction on bookmaking will change if the US loses its appeal in respect of the World Trade Organisation’s decision relating to Antigua and Barbuda. Once the UK Gambling Bill is in force, if the UK allows bookmakers to take bets from the US, then so will the Isle of Man.

Taxation

Bookmaking: The duty is a percentage of the net stake receipts — essentially, the gross profit. There are three rates of duty for bookmaking, depending on the type of licence and the location of the bettor:

1) 10% for bets with persons on the island (Public Betting Office Licence);

2) 15% for bets with persons who are in the UK (Public Betting Office Licence); and

3) 1.5% for international bets (Restricted Betting Office Licence). As the rate payable by Isle of Man bookmakers for bets with persons in the UK is the same as that payable on the UK mainland, bookmakers taking this type of bet are allowed to advertise their services in the UK.

If the company does not take bets from Isle of Man residents, it can apply for tax exemption status, which then makes the company exempt from corporation tax. This will soon be academic, as the Treasury has announced that the rate of corporation tax on the island will be reduced to zero by 2006 .

It is therefore possible for a bookmaker to operate its internet operations from the island and only have to pay a duty of 1.5% of net stake receipts for international bets.

Gaming: The duty for gaming under an Online Keluaran SgpGambling Regulation Act Licence is 2.5% of gross gaming yield (bets made less winnings).

In the Treasury Minister’s budget speech of 15 February, 2005, it was announced that as from 6 April, the rate of corporation tax payable by the operator of an Online Gambling Regulation Act licence will be zero.

Bandwidth

The key factor that separates the island from other offshore gambling jurisdictions is its excellent telecommunications system and enormous bandwidth capacity. The island was the test bed for the 3G mobile telephone system and is now involved in the development of 3.5G.

An internet gambling site is completely dependant on the telecommunications system and a failure in the network, even for a few minutes, can severely damage a company’s reputation.

Manx Telecom links to three Tier-1 carriers via E3 — Cable and Wireless into Manchester, Band-X into London and Pipex into Manchester. There are two self-healing rings (four fibre-optic cables) running off the island using SDH technology. This ensures traffic continues to flow, even in the event of a break at any point in the network.

The existing resilient fibre ring with its 1.2 tera bits per second capacity, is capable of carrying up to 10 times the current transatlantic internet traffic between Europe and the Americas.

Infrastructure

The Isle of Man’s Parliament, Tynwald, has been in existence for more than 1,000 years and legislates for the island. The jurisdiction is a common law one, and has an independent judiciary with the final redress being to the Privy Counsel. The island’s Law Society is independent, and Manx advocates are a fused profession that carries out the role of both solicitor and barrister, with full rights of audience in the island’s courts.

As the island has a relatively small population of about 80,000, with virtually no unemployment, it is probably not the best place to locate low-paid, staff-heavy support services, such as call centres.

Licence holders are free to locate support services off the island, as long as the company is genuinely run from, and bets taken, there. This enables licence holders who are, for example, targeting the Far East, to have a cost-effective helpdesk in that jurisdiction, with staff who speak the players’ language.