bet365 and tax havens
Gambling is big business. The boss of bet365, Denise Coates, has been in the press recently for paying herself the staggering amount of £323m (£277m in salary plus £46m in dividends) last year, the equivalent of £1.3m per working day. £235bn in bets have been wagered through her company over the past five years, making it one of Britain’s largest bookies, generating some £684m in post-tax profits last year alone. With a net worth estimated at £9.3bn, Coates is thought to be one of the largest taxpayers in the UK.1 The Stoke based betting giant saw its post tax profits rise from £52m in 2009 to £685m in 2019.
However, scrutiny of the bookmaker’s accounts appear to show hundreds of millions of pounds a year in revenue generated in tax havens. In this article we delve into why this might be happening.
Almost every stock-market quoted gambling company gives a breakdown of its revenue. Family-owned bet365 doesn’t, stating in their accounts that “A geographical analysis of turnover has not been given, as in the opinion of the directors, such disclosure would be severely prejudicial to the interests of the group.” Analysts in 2018 estimated that three-quarters of revenue came from international sources.2
While the accounts are certainly not what you would call transparent, some idea of overseas earnings can be gleaned by looking at the company’s tax disclosures. Over the past five years, bet365 has seen a reduction of £176m in their corporation tax bill through what is listed as a “difference in tax of overseas subsidiaries”.
What this means is that bet365 has seen a 30% decrease in their tax bill versus what it would have been had all bets been processed in Britain, from £550m to £373m, thanks to profit generated in countries with a lower corporation tax rate than the UK. Though the amount of revenue generated in “overseas subsidiaries” is not listed in the publicly held accounts, in order to see a reduction of £176m the amount of overseas revenue must be in the billions.
Though bet365 has gambling licenses in 14 jurisdictions, the only ones with a lower corporation tax rate than the UK are Bulgaria, Cyprus, Ireland, and Gibraltar (combined population of 13m). bet365 would have to post pre-tax profits of £1.763bn in Gibraltar or Bulgaria over a five year period, jurisdictions with a corporation tax rate of 10%, in order to see a reduction of £176m in the company’s corporation tax bill. Should these profits be declared in Cyprus or Ireland, at a 12.5% corporate tax rate, the amount would have to be even higher. Either bet365 is making vast sums of money from these small jurisdictions, or another explanation is that they are using these jurisdictions to take bets from markets in which they have no license to operate.
There is much speculation online about bet365 operating in unregulated markets.34 Ralph Topping, a former chief executive at William Hill, says bet365 probably operates in many grey markets: “They have more risk appetite than puritanical companies.”5
A Guardian investigation from 2014 revealed that Chinese citizens had been arrested after gambling on bet365’s website, with the company frequently changing its Chinese web address in order to side-step regulation. The report goes on to claim that the bookmaker has a call centre in Stoke employing Chinese-speakers.6 Along with Fixed Odds Betting which is popular in the UK, bet365 also offer Asian Handicap betting, a type of gambling which is hugely popular in China. In response, bet365 said at the time:
“There is no legislation that expressly prohibits the supply of remote gambling services into China by operators who are based outside China. bet365 has no people, assets or infrastructure in China and does not engage any agents, aggregators or intermediaries, for any purpose, in China.
“In the view of bet365, and its lawyers, Chinese law does not extend to the provision of services into China by gambling operators and service providers who themselves have no nexus with the territory. Any allegation of illegality on the part of bet365 is therefore untrue.”
When we used a virtual private network to make it appear as though we were based in China, we found no difficulty in accessing bet365’s website.
In 2019, another British gaming company was unequivocally found to be operating in grey markets. The boss of GVC, responsible for betting giant Ladbrokes Coral and Foxy Bingo, apologised to the Nevada Gaming Commission for operating in Turkey, where gambling is restricted. Nevada regulators chastised the chief executive, calling him “lackadaisical” about GVC’s operations in Turkey.
Is bet365 operating in grey markets and moving hundreds of millions in profits through low-tax jurisdictions each year? Until bet365 is more transparent, we will never know.
We emailed bet365 to ask how much they generate in revenues from countries in which they don’t hold a license. The company has not responded to our request for comment.
This research was featured in The Times.
1 The Sunday Times Tax List 2020: meet Britain’s top 50 tax payers, 26 January 2020, 2019, available here; https://www.thetimes.co.uk/article/sunday-times-tax-list-2020-uk-taxpayers-nhs56k95d
2 bet365 stands out among rivals for more than pay, available here; https://www.ft.com/content/f40e1b44-ee60-11e8-89c8-d36339d835c0
3 Are Chinese punters big users of bet365? The firm still won’t say, 21 November 2018, https://www.theguardian.com/business/nils-pratley-on-finance/2018/nov/21/are-chinese-punters-big-users-of-bet365
4 UK gambling market comes under siege, 09 February 2020, https://www.ft.com/content/7eed86fc-4354-11ea-a43a-c4b328d9061c
5 bet365 stands out among rivals for more than pay, 22 November 2018, https://www.ft.com/content/f40e1b44-ee60-11e8-89c8-d36339d835c0
6 Revealed: how bet365 profits from Chinese punters who risk jail for gambling online, 03 October 2014, https://www.theguardian.com/society/2014/oct/03/bet365-profit-china-online-gambling