The UK’s decision to implement a 15% point of consumption tax (POCT) on offshore-based gambling operators supplying remote services to the UK is to be examined by the Court of Justice for the European Union (CJEU), following last year’s successful legal challenge by the Gibraltar Betting and Gaming Association (GBGA) in the High Court
The High Court has referred the case to the CJEU on the grounds it raised a number of issues related to EU law which had to be addressed before the broader question of taxation levels could be settled.
At the original judicial review, the trade association GBGA argued that the new tax regime introducing POCT is incompatible with Article 56 of the Treaty on the Functioning of the European Union (the TFEU). [The Queen (on the application of), the Gibraltar Betting and Gaming Association Ltd and the Commissioners for Her Majesty’s Revenue and Customs, Her Majesty’s Treasure and Her Majesty’s government of Gibraltar [2015] EWHC 1863 (Admin)Case No: CO/4813/2014].
This states that: ‘Within the framework of the provisions set out below, restrictions on freedom to provide services within the union shall be prohibited in respect of nationals of member states who are established in a member state other than that of the person to whom the services are intended.
‘The European parliament and the council, acting in accordance with the ordinary legislative procedure, may extend the provisions of the chapter to nationals of a third country who provides services and who are established within the union.’
The CJEU is now being asked to clarify Gibraltar’s status within the UK, such as if Gibraltar and the UK should be treated as a single member state when applying EU law. The GBGA believes that the 15% levy is ‘an unlawful restriction on the supply of services to the UK,’ which is forbidden under Article 56.
The High Court ruling states: ‘The Article 56 issues are potentially relevant to other questions of taxation and potentially of general importance, not only to the UK but also to other member states, and to businesses and consumers throughout the EU. A reference to the CJEU would enable other states and the commission to intervene and make submissions.’
In its submission to the High Court, HMRC sought to argue that the relevant taxes imposed by the new tax regime do not engage Article 56 because they are internal or domestic taxes, and do not have a discriminatory impact.
The case is listed by the CJEU for hearing, but no date has been given. It is expected to be several months before the EU court comes out with a full judgment. Should the CJEU rule that the POCT is incompatible with EU law, the UK government would be required to scrap the tax and refund the hundreds of millions of pounds it will have collected.
A spokesman for HMRC said of the High Court judgment that it ‘has not found against any aspects of the UK gambling tax regime, and we remain confident that the place of consumption reform for the gambling tax regime is lawful.’
CJEU listing is here.
