Minister Nigel Feetham KC MP speech delivered at the KPMG eSummit 2024

27 Jun 24

The Hon. Nigel Feetham KC MP – KPMG Summit 2024

This is my first KPMG E-summit as Minister responsible for the gambling sector in Gibraltar; but it is an industry that I am familiar with and I have already engaged with a number of operators.

I am delighted that numerous key industry leaders have accepted invitations to this conference and we will hear about the challenges they face. 

We will also hear later today from a panel of regulators from the UK, Isle of Man, Jersey and Gibraltar about the challenges of regulating multi- jurisdictional operators and the increasing level of co-operation at a supra national level between regulators. Gibraltar is proud to be making a contribution to that regulatory network. 

It is fantastic that regulators from other jurisdictions are prepared to travel to Gibraltar. 

I extend a warm welcome to you all, but would particularly like to thank KPMG and the sponsors for their support for the conference.

The theme of the summit is one devoted to horizon scanning and what the next decade will look like.

From my perspective the subject matter of the conference is of key importance to a jurisdiction which derives in excess of 20% of its GDP from the sector in the form of taxation and wider macro- economic contribution.

It is also a changing sector: multi- jurisdictional in nature, still consolidating because of the rising costs of doing worldwide business, but with an increasingly complex competitive supply chain which includes new technologies.

It is with that in mind that I am able to announce that the final amendments to the Gambling Bill have been made and we hope to publish this shortly, before taking the Bill to Parliament in the early Autumn. We intend to go live with aspects of what will then be a new Gambling Act as soon as practicable, during the first quarter of 2025.

We have already consulted on the Bill and made changes to some of the original proposals (reflecting constructive industry feedback that the Government has been able to agree and accept).

But we will of course continue to listen to the industry and consider any feedback on those provisions of the Bill that you have not already seen. Where we can accommodate such feedback without undermining the objectives of the Bill, we will.  That said, we do not anticipate any further fundamental changes.

As you all know, the unchanged policy of the Government is that Gibraltar should remain an attractive location for this industry. The Government and Gibraltar as a whole understands the industry and its needs and welcomes it here.

The new Bill reflects this, while at the same time also reflecting the Government's continuing determination that Gibraltar should provide a supportive and attractive environment for the industry, safeguarding its reputation and the interests of consumers. 

Much work has been done to ensure that the Bill strikes the right balance to achieve our objectives.

This is reflected, for example, in the approach to marketing taken in the Bill. One threat to the reputation of Gibraltar, and by association to all of you, that has been identified is the risks that arise from marketing (and other similar) activities carried out from Gibraltar that associate Gibraltar with online gambling that takes place elsewhere without our regulator having any handle on that gambling activity.

For that reason, the Bill introduces a licensing regime for the provision in or from Gibraltar of marketing services for online gambling, wherever in the world that online gambling takes place.  This will enable the Licensing Authority and the regulator to have effective oversight of those activities in Gibraltar.

However, the commercial requirements and business models of online gambling companies established and licensed in Gibraltar have been accommodated in the Bill. B2C licensees will be able to carry out marketing activity from Gibraltar under the auspices of their operational licence.

Beyond, and excepting this, licenses will not be available for third-party (i.e. non-group) marketing activities conducted in or from Gibraltar that support marketing of non-Gibraltar online gambling businesses, unless the licensing authority is satisfied that granting a license to do so will not prejudice or threaten any public interest of Gibraltar, and then only subject to such terms and conditions as the licensing authority  may impose. 

So, in effect, grant of marketing services licenses will to be subject to the licensing authority's absolute discretion, which will be exercised on a case by case basis. 

This will enable us to support the needs of the local licensed industry while protecting it and the jurisdiction from reputational risks.

The licensing proposition is still very much founded on reputable businesses with substance, making a macro- economic contribution in Gibraltar. Part of that contribution is tax yield in the form of PAYE and Corporate Income Tax (as well as gambling fees and duties).

I have been vocal and proactive on the subject of tax yield from our financial sectors. I have used the words “financial sectors” generically to include all the commercial sectors under my purview; to include the gambling sector.

Under my wider Ministerial responsibilities, I have overseen the recruitment of two tax accountants to the Income Tax Office and an MOU has been signed between the Income Tax and Gambling Commissioners.

Before a hare starts to run, this is not about Gibraltar unreasonably raising taxes or being over aggressive on multi- jurisdictional tax planning, but about ensuring the proper authorities are more proactive in this area; making sure that profits accrued and derived in Gibraltar are properly accounted for and taxed in Gibraltar. 

Also, that Group losses which should not properly be attributed to Gibraltar are not booked here and that transfer pricing (including valuation of brand) are properly costed at arms- length. 

In a world where multi- jurisdictional operators are under pressure from other tax authorities to allocate profits in their jurisdiction, Gibraltar has to be proactive in this area. 

It may be counter intuitive to believe that decisions would be made to move profits away from a lower tax jurisdiction, but sometimes pressure from other jurisdictions drives such behaviour and there is still the remaining, but diminishing attraction of “no tax” jurisdictions.

I am deliberately linking tax compliance (which includes furnishing accounts and tax returns on time) to licensing, to ensure that there is a coordinated view on the overall suitability of a business and the contribution it is making.

From what I have seen, the gambling sector is broadly compliant. Indeed, I have relied on operators for advice in formulating my approach here. What I could not allow is for the wider business community to believe that Gibraltar is benign in this area and to allow anyone to think that international tax planning decisions would not need to be supported by evidence and reasonable justification.  

Those who are doing it right, which is the majority, have nothing to worry about; although all might be subject to more proactive scrutiny as a consequence of what I see as increases in public sector efficiency and co-ordinated effort.  

Moving to the negotiations on frontier fluidity.

As the Chief Minister has said repeatedly, it is difficult to fathom the complexity of the Treaty negotiations and all the details relevant to a potential Treaty even for those who are intimately involved in the process. 

Negotiations are still live. There have been inevitable delays created by the European elections and the UK General Election and the need for new governmental structures to bed in.

Imposing VAT on services that could impact on our gaming operators is a “red line” issue for the Government of Gibraltar.

It is right that we must also continue to prepare for a no negotiated outcome and many operators have participated in table top exercises on this issue. Being unprepared would weaken out negotiating position.

We have little doubt that a UK government of whatever shade would stand firmly behind Gibraltar in any event.

Even a failure to reach a Schengen type deal may still not rule out a localised frontier fluidity deal (as encouraged by the EU for member states with a third country border), but whilst this is a theoretical fall-back position, the objective is still to pursue option one.

Finally, returning to what is on the horizon.

I am keen to expand the sector in Gibraltar and whilst we have lost EU business (in terms of licensing) our sector employee numbers continue to be stable. Gibraltar is still seen as a hub and centre of excellence for online gambling and some operators continue to drive their worldwide activity or certain functions from Gibraltar.

We still have an ambition to expand rest of the world and emerging market business in Gibraltar and I want to make it clear that Gibraltar is open for business to responsible operators who want to bring all or part of their operational activity and substance to the jurisdiction.

With the jurisdiction being 72% UK facing, we feel that Gibraltar is by far the best jurisdiction from which to run a UK facing business and we believe from discussions with prospective licensees that the jurisdiction is seen as a live option (watch this space).

One of the attractions of Gibraltar is that it has a government that empathises with and encourages business and a regulator that is accessible and pragmatic; in comparison to some other jurisdictions.

That said, we are not involved in a race to the bottom with any emerging licensing jurisdiction. Having been removed from the FATF grey list, we must maintain anti money laundering standards and our new Gambling Act will encourage best practice in social responsibility; whilst not necessarily reflecting the more austere and restrictive approach being adopted in certain European states.

We believe that there is still a place for responsible point of supply jurisdictions, but we respect the regimes in other jurisdictions and where a country offers licensing on an open market and non- discriminatory basis, we would expect our operators to hold that licence; if necessary on a dual licensed basis.

I will be seeing many of you during the day and later this evening so, once again, welcome to Gibraltar, enjoy the conference and the wider cultural experience that Gibraltar has to offer.