Betfair, the leading internet betting exchange, has received a licence to operate in Malta that could eventually lead to the company moving its hugely successful business offshore. The firm's move is sure to be seen as a warning to the Treasury that it will not tolerate any attempt to introduce punitive new taxes on its revenue.
For the moment Betfair's new office in the Mediterranean is planned solely to host a new betting product, which the company intends to launch later this year.
However, Betfair's executives are also aware that it would now be relatively easy to move the bulk of its operation to Malta and avoid the requirement to make duty payments to the British government on its revenue.
Since Malta is a member of the European Union, there would be no need to restrict Betfair's advertising and sponsorship in Britain, while it might also be possible to move its computer servers - where the exchange is "hosted" - to Malta while maintaining its main office in Britain.
At present Betfair pays 15% of its gross commission revenue to the Exchequer, in the same way that other bookmakers make duty payments of 15% of their gross profits.
However, the explosive growth of exchange betting over the past four years has been followed by complaints from traditional bookmaking firms that the system by which Betfair's duty obligations are assessed is unfair. These complaints looked to be heeded in March 2004, when Gordon Brown ordered a review of "the tax treatment of betting exchanges and their clients". This review is now thought to be close to completion.
