The Gibraltar Betting and Gaming Association (GBGA) has mounted a series of legal challenges against the requirements of the UK Gambling Act, introduced in 2014. It claims the POC tax is illegal under European law, because it violates Article 56 of the treaty on the functioning of the EU (TFEU), which deals with the right to trade freely across borders.

The UK legislation, as well as introducing the 15% duty for all gambling operators serving the British market, whether they were located in the UK or elsewhere, also required operators to be licensed and regulated in the UK. Previously, businesses were able to be licensed in a number of jurisdictions around the world that had been whitelisted by the UK, such as Gibraltar, which offered a more favourable level of taxation for operators.

GBGA initially challenged the act itself in the High Court, a challenge that was ultimately rejected in October 2014. The association then sought a judicial review on the specific issue of the legality of the POC tax, which resulted in the referral to the ECJ.

The ECJ advocate general Maciej Szpunar has now provided an opinion in which he states: ‘Although this case is about the relationship between an island and a rock, I will not resort to the plot device of a cliff hanger in this opinion. I propose that the court should hold that, for the purposes of Article 56 TFEU, Gibraltar and the UK are to be treated as one entity.

‘There is a purely internal situation which does not trigger the applicability of Article 56 TFEU. In the alternative, should the court find otherwise, I propose that the provisions of the new tax regime which are contested in the present case should not be regarded as a restriction on the freedom to provide services, given that they apply without distinction and on a non- discriminatory basis to gambling service providers located in the UK and elsewhere.’

On the specific issue of the legality of the POC tax, Szpunar said the GBGA and the Gibraltar government took issue with the fact that the taxes in question are not restricted to actual consumption taking place in the UK because the customer, that is the chargeable person under the new tax regime, may not be in the UK at the time of the transaction.

‘I am not convinced by this argument, and it even appears to me that it attempts to turn the principle that an internet transaction can and must always be linked to a specific member state on its head.

‘It is certainly true that a person who is resident in the UK and registered as a UK person with his/her credit card details may participate in online gambling, that is enter into a transaction, while on holiday elsewhere abroad. That is not the point, however.

‘What is crucial is which legal jurisdiction that person is the subject of. If a person is registered in the UK because this is where he has his centre of interest, then I fully understand that, for the purposes of the consumption tax, he is regarded as consuming in the UK.

‘In other words: just because the internet is as universal as it is and just because one can enter into transactions when not physically present in one’s member state of origin does not mean that one does not consume in that member state,’ he said.

Although the ECJ is not obliged to follow its advocate general’s opinion, it often does.

A government of Gibraltar spokesperson said: ‘Her Majesty’s government of Gibraltar notes the opinion of the advocate general of the ECJ in the case brought by the GBGA. The government will not comment until the final judgement of the European Court.’

The opinion of advocate general Szpunar Case C 591/15, The Queen, on the application of: The Gibraltar Betting and Gaming Association Ltd versus Commissioners for Her Majesty’s Revenue and Customs, and Her Majesty’s Treasury is here.