One of the world’s most popular tax havens for online gambling companies, Gibraltar, is set to raise its gambling tax rate tenfold to 10 percent.

With one of the very lowest and most attractive rates of taxation for online gambling companies held to just one percent for the past ten years, the British Overseas Territory of Gibraltar has attracted some of the world’s biggest names in the industry. Firms like Ladbrokes, PartyGaming and William Hill have taken advantage of this highly competitive deal to make Gibraltar one of the gambling capitals of the world. However, the party is set to be toned down a notch or two as Gibraltar plans to raise the tax rate to 10 percent in order to fall into line with European regulations that govern fair trading.

This is the standard rate of corporation tax already charged to companies based in Gibraltar and is still one of the very lowest in Europe. Online gambling companies enjoyed a special rate of tax which included a ceiling of €500,000 and this provided a way to successfully compete in a highly competitive industry.

The new rate of tax will come into force on 1st January 2011 for all online gambling companies, although some of those that more recently relocated their operations to “The Rock” such as bookmakers William Hill are already paying this rate. It is expected that all gambling companies currently trading from Gibraltar will continue to do so at the new rate. This is because it is still cheaper than elsewhere in Europe. Most of the companies affected by the rise have been aware of its coming for some time.

Online Gambling Tax Set to Rise in GibraltarThe first minister of Gibraltar, Peter Caruana, said of the tax changes that in order to comply with current EU law, Gibraltar needs to phase out the ability for companies to be tax-exempt in 2010. While this necessity is being complied with, it is also necessary to sustain the economic model that attracts businesses to Gibraltar. This calls for a highly competitive corporate model including a low rate of corporate tax.

Spokesman for the Gibraltar-based online gambling company PartyGaming, John Shepherd said that while the higher tax rate would affect some companies that have enjoyed an incredibly low rate for many years, he did not believe it would stop more companies from bringing their offshore operations to Gibraltar. Despite the UK having one of Europe’s largest gambling audiences, a lot of operators chose to locate in such jurisdictions as Gibraltar and Malta as their taxation and corporate packages were far more attractive than basing in the UK itself.