South Africa the hosting nation of the World Cup this year has banned online bingo for people living within the country with the threat of prison sentences for those that break the new laws. In fact the laws outlaw any form of online gambling. The Gauteng Gambling Board in South Africa has ruled that gambling using digital products inside the country is illegal.

The details were released after a ruling on the 20th August at High Court in relation to online gambling transactions. The High Court judgement will effect both online gambling operators and those that gamble online. It has also been suggested that internet service providers and banking institutions that do not take precautions to ensure that the laws are not broken could also find themselves in breach of the legislation. In fact according to the Business Today anyone that advertiser or facilitates advertising of online gambling will also “face the law”. Penalties for breaching gambling laws include up to 10 years in prison or a fine up to the equivalent of £1 million.

While it is not known how they intend to ensure conformity of the legislation especially where the operators are not based in South Africa, it is believed that they will follow suit of the several countries in Europe where the IP addresses of gambling companies are blocked.

Online gambling in the UK has to date avoided direct confrontation with the Government, however this is unlikely to be the case for too much longer. The new Conservative-Liberal Government is looking to review all laws in the UK and have made reducing the budget the number one thing to tackle at the present time. The bingo industry has constantly complained of the tax regime system which without legislation significantly favours online gambling. One operator of both land based gambling sites and online sites suggested to us recently that he believes the UK government will look at new legislation in 2011 that will have a major impact on the online gambling industry. At Seldis Cooper, Operations Manager, Dave Holt, commented “that it was only a matter of time” before the Government reviewed gambling taxes.

The US outlawed online gambling a number of years ago based on their legislation that you could not gamble over state lines. It seems that countries all over the world are now waking up and realising the problems with online gambling. Whenever you buy anything within a country you are subject to the tax laws within that country and therefore the country where the buyer resides takes a cut of the purchase in the form of a VAT. If the purchase is made online from another country the VAT is still payable when the item is shipped into the country (for member countries within Europe there is some differences but the principle is generally the same). However, within online gambling in the absence of legislation the Governments where the person spending the money resides get no tax revenues and there maybe a cost associated. With online gambling tax is paid in the form of profits where the operators are based and for obvious reasons this is generally in the lowest tax regions around the world. Governments are therefore missing out on a VAT tax and also a profits tax.

Money spent on online gambling could be spent on other goods or services including gambling at land based sites such as bingo clubs or betting shops. This would help the local economy and may result in extra people being employed. Money spent at land based gambling sites (or alternative) would not only bring VAT and profit related taxes it may also result in extra income tax. Online gambling is not good for a countries economy; it means that wealth within countries is being filtered out without any benefits.

Online gambling is generally not regulated or at least not regulated to the same degree to which land based gambling sites will be regulated. In the UK for example all gambling operators that based in the UK are regulated by the Gambling Commission and have to adhere to a strict code of conduct. Gambling in the UK is therefore very safe and operators have a responsibility to their members. Problem gambling is clearly much more common with online gambling in the UK than it within bingo clubs, casinos, arcades and betting shops. Problem gamblers are obviously a concern and a cost to the society to where they live.

Countries around the world that have not already outlawed online gambling or required operators to be licensed and pay profits on losses of players within their country (as per the rules France has recently introduced) are likely to follow suit shortly.