Taxation as an Ethical Issue in Online Gambling - Literature review Example

Online Gambling Literature Review Name: Unit: Course: Professor name: Submission Date: Taxation as an ethical issue in online gambling Overview Manzin & Biloslavo, (2008 p.98) online gambling is an activity spread worldwide in both organizational and a technological aspect. Focusing on technology, online gambling can be clearly understood as it uses internet, although organization aspect is less evident. This is because organizational globality depends on the uncertainty on legal issues that safeguards online gambling. Thus, the mandate to submit or not to submit taxes to the various jurisdiction remains a challenge to many online gambling organization. There are less and or limited online gambling regulation, and as a result online casinos can operate across national borders simultaneously unchecked and with no objection to submit their taxes as well as protect the common good will of the consumers. Online casinos work in such a manner that they have their support centers and server for games dispersed in several countries in particular locations in line with each individual country’s regulation while in some country’s such regulations are weak and unreliable to safeguard the goodwill of the society. For instance, North America is a leading nation with most clustered online gambling servers with Antigua have many serving points. The United Kingdom, has slowly been embracing online gambling business with motivation been received via the Gaming Act 2005 implementation. The Act highly liberalizes online gambling regulation. Manzin & Biloslavo, (2008 p.99) taxation within the UK’s jurisdiction with the implementation of the Act is foreseen to continue rising. The business operators will benefit from friendly regulation that inspire investors and customers confidence, high number of skilled workers, a steadfast communications infrastructures, vibrant capital markets, and a stable political environment. Manzin & Biloslavo, (2008 p101) online gambling offers an opportunity for expansion and transformation of the services which the traditional casinos offers. According to research, online gaming is growing at a 20% rate per annum with explicit annual turnovers being recorded. Commercial and markets opportunities have been tapped and embraced by various enterprises with no direct linkages with gambling services. Despite the expansion on online gambling taxation is still an ethical issue that remains unaddressed in many jurisdiction. For instance, online gambling is foreseen as a fertile ground for tapping government revenues. Thus, concerns are raised that driving force to build revenues within the government may deter the government in laying out clear foundation to safeguard the well-being of its people. Various reasons encourage investors to enter the online gambling business. Low start up cost compared to a traditional casino Existence of few legislative barriers on the market entry more so in the ‘off-shore zones’ Online casino market rapid growth with high earnings Taxation as an ethical issue in online gambling discussion Online gambling is no longer the known minor window show, rather a vast global industry. In 2012, global online gambling market estimates did hit 9.5% of all worldwide gaming revenues. The platform outsources highly seasoned professionals in technology and commerce to ensure competition and generate substantial amount of revenue taxes. In the EU online gambling account for 45% of revenues accrued globally and is growing fast with tax revenues believed to have doubled by now from €6.16bn-€13bn. Online gambling growth is not exclusively supply-driven phenomenon because clear demand factors and side trends drive the industry. Internet penetration for example in EU27 hit 73% in 2013 from 51% in 2005. Online gambling availability and accessibility has become easier via the mobile technology, making it an attractive alternative in relation to person gambling. This has created increased number of consumers hand in hand with availability and accessibility advantages compounding supply and demand forces. But, there are unaddressed measures in protecting consumers from money laundry (Codagnone et al., 2014 p.25). There are varied national approaches in regards to gambling and this raises taxation problems. For instance, how to levy gambling services, betting, and VAT on gambling services supplied via the internet or in various Member States (MS). In reference to the EU VAT Directives of Article 135(1) (I); foresees an exemption on various forms of gambling including lotteries and betting subject to the limitations and conditions set by each Member State. Exempted games within this definition like internet games and pinball machines are subject to VAT which EU providers should pay within the Member State in which they operate. Gambling tax and betting tax in addition to VAT is applied in most of MS. For instance, Netherlands have taxation legislation. Further, the Netherlands also taxes online games prize winners. Thus, taxation ethics is seen as a restriction measure to deter corrupt online gambling that goes unmonitored and may pose harm to the consumers in the long run realizing more losses than benefits (Zibold, 2013 p.4). Business ethics/ marketing Ethics and Taxation as an ethical issue in online gambling If designed properly, remote gambling taxation can provide sources of revenue to the national government. There is high competition in regards to remote gambling. The sector on online gambling is highly competitive. Marketing mix employs 4Ps as key driver to market growth and customer base. Price is a sensitive issue and in many cases triggers consumer differences and often consumers may switch to other operators with ease of whom in some cases are on other jurisdictions. Therefore, is imperative that when deciding tax systems for online gambling devise its own system with its right without adapting the land based gambling industry measures and applying them to the remote gambling. Generally, carrying out business in reference to the total tax weighty is an important factor looked into business as they decide on whether to enter a certain jurisdiction’s policy support the success of remote gambling. High tax measures that prohibits business entry into a particular jurisdictions and or improperly structured one is likely to discourage leading operator from a given market. The consequence is that the government at the end collects lower revenue and leave the consumers with fewer choices of selection. Total tax burden need to be calculated for all costs likely to be incurred like the actual tax rate, compliance costs, administrative cost, licence fees, and business taxes associated. Summing these expenses including market entry and advertising need to be put into consideration. Hence, if the tax regime is tough many operators will be barred from taking the licences. If workable tax rates are laid out such an efficiently structured tax may offer benefits to the governments, operators and the consumers and ensure ethical remote gaming. Using a gross profits tax (GPT) structure, the levy goes directly to the revenues of the operator. This creates humble ground as the operator can attract consumers with varied choices with no concerns in respect to various offerings. For remote gambling GPT is seen as the best alternative following its potentiality of providing varieties to consumers, entertainment and better value (Remote Gambling Association, 2011 p.6). Taxation as an ethical issue theories in online gambling Aquina’s Virtues theory With gambling the state government promote attractive product to the poor and motivates citizens to risk money. This undermines the fact that the primary role of the government is to unite its people. In respect to taxes, it is ironical to support that only a strong tax base that can support and improve the living standards of people. And thus, gambling cannot be supported as the primary contributor to the common good of the society and economic. According to Thomas Aquina’s virtues theory, Aquinas did punch on development and the link between the virtues. Some virtues like love, hope and faith are from God, but other virtues grow by putting them into practice as human beings develop. For instance, honest in cultivated by being truthful and virtue of generosity is embraced through sharing resources. The actions of people shape themselves and the world via various vices and virtues. A person with no civic virtues despite their degree of developed virtues have deficiency in the qualities forming good moral character. Otherwise being a good citizen and a bad one remains a contradictive term. According to Aquina’s theory it is very important to pay taxes as participants in civic life. This is so as the opportunity for a person to participate in shaping the goodness in one’s community is fundamentally correct as the person gets an opportunity to develop his/her civic virtues. However, robbing a citizen such an opportunity then kills such vital characteristic element. For instance where a government imposes tax system that discourages citizens to be part of the online gambling. In assessing the online gambling the picture gathered from the literature is that, such systems are: appealing to the rich, dose not foster superstition in respect to number of compulsive gambling, no need of ads to flourish, no need of expansion, but produces stable revenues, builds other businesses profits, encourages donations for charities, discourages illegal gambling, and does not embrace any negativity to the consumers and operators. This remains an ideal situation in respect to the reports of and researches on gambling platforms. The controversy is that lotteries serves fundraising in other cases, yet they dodge the pure process that individuals can developed their civic virtue by supporting the common good directly. When a government request to uses taxes to support the community it does acknowledge that it is each person concern to support the common good of the community. Thus, a tax bill is a physical reminder that morally connects all human beings. Therefore, contributions of good will are not generously conditional goods, but obligations that should be made to the citizens to ensure justice (Fleming, 2011 p.35). Economic theory Extremely complex tax system negatively affect online gambling industry. This is so following inherent uncertainty in various products offered, and lack of predictability. A GPT system is highly predictable as much as possible. The operator may make calculation due to its transparent nature and the relevant authorities can efficiently oversee its process. Also, a GPT is simple, for administration use and has lower regulations cost and to the operators it presents lower compliance cost. GPT is imperative in that it discourages illegal gambling among the consumers. This happens because the turnover taxes are channeled to the consumer, and subsequently protects the consumer if workable rate to the operator are introduced. In respect to UK HM Revenue and Customs also found that adapting GPT for online gambling did decrease the rate of illegal betting protecting greatly the government revenues (Remote Gambling Association, 2011 p.6). However, ethical questions arises, does online betting cost the consumer? Why government should sponsored gaming cost the consumer who already has paid other taxes to the nation? On one hand the government need revenues, but does online betting support the significance of these as the poor and needy people are the most targeted people, rather than protecting their good will? Currently, there are emergence of modern types of punters and gamblers. They look for new trading-off opportunities that may reward heavily, ‘sure bets’ who mask as players as it is in financial market. Therefore, the global online betting attracts criminals, money launderers and financial traders. Such criminals escape with players money, with common cases in UK where online-betting welcomes operators within European economic area or those in the White list, indicating that the latter may open accounts in partnership with betting operators in tax havens locations (Andreff, 2017 p.4). Corporate social responsibility States in German did propose a centralized system that can block problem gamblers. However, tax base remains a key player because GGR tax results into higher ‘absorption’ levels of the market unlike a stakes tax with significant effect on non-German regulated operators. But, the more German market will be captured, there will be more social responsible effective initiatives like player blocking subsequently protecting the consumer and the nation from losing revenues (PwC’s Gaming Centre of Excellence, 2011 p.42). Recommendations In the UK, Gambling Licensing and Advertising Bill aim at implementing taxation in reference to consumption principle. This is so as only 10% of customers’ remote gambling in the UK pay gambling duties. It is imperative to put in action consumption taxation. Using consumption taxation principle, an operator will be mandated to gross gambling profits tax generated from UK’s customers regardless of the location of the operator globally. Consumption taxation basis for remote gambling in any nation will balance the playing field ensuring fairer competition platforms between remote gambling from UK and overseas. Non-UK customer, will be excluded as per the tax system terms and conditions, a reform likely to strengthen competitiveness within the UK tax system. The tax structure will remove a disincentive attracting remote gambling businesses to tap UK market and subsequently retain present operators (EPMA Pari Mutuel Europe, n.d. p.4). Online gambling should be regulated to ensure that it is not only economically focused to build the nation, but also to protect the individual from advance and unknown taxation fees. Further, with challenges of implementing and coordinating an effective international regulatory framework, each nation should structure its own online gambling regulations, and address gambling from outsiders and gambling to outside nations from the country. References Andreff, W. 2017. Complexity Triggered by Economic Globalization. The Issue of Online Betting Related Match Fixing. MDPI. Codagnone, C., Bogliacino, F., Ivchenko, A. et al. 2014. Study online gambling and adequate measures for the protection of consumders of gambling services. Study on Online Gambling Report. [Online]. http://ec.europa.eu/internal_market/gambling/docs/initiatives/140714-study-on-online-gambling-final-report_en.pdf, accessed 3/20/17. EPMA Pari Mutuel Europe. n.d. Taxation Digital Economy. [onine]. http://www.parimutuel-europe.org/Download/11_Taxation_Digital_Economy.pdf, accessed 3/20/17 Fleming, J. 2011. State Lotteries: Gambling With the Common Good: The Gambling Culture. Center for Christian Ethics at Baylor University. [online]. http://www.baylor.edu/content/services/document.php/144583.pdf, accessed, 3/22/17. Manzin, M. & Biloslavo, R. 2008. Online gambling: today’s possibilities and tomorrow’s opportunities. Managing Global Transmissions vol. 6, no., pp. 95-110. PwC’s Gaming Centre of Excellence, 2011. Taxation and Online Sports Betting In Germany. [Online]. https://gamblingcompliance.com/files/PwC%20Report%20German%20betting%20tax%202011.pdf, accessed 3/22/17. Remote Gambling Association, 2011. Online Gambling: Key Objectives for a Successful Regulatory and Tax Framework. [Online]. http://www.rga.eu.com/data/files/Factsheets/rga_key_objectives.pdf, accessed 3/21/17. Zibold, F. 2013. Online Gambling In the EU. Library of the European Parliament. [Online]. http://www.europarl.europa.eu/RegData/bibliotheque/briefing/2013/130509/LDM_BRI(2013)130509_REV1_EN.pdf, accessed 3/21/17. Read More