Vicki Woods is very good today.

The point of the British licence is to encourage the
world’s casino websites to base themselves here, where they can be
diligently regulated night and day by 50 compliance managers newly
recruited for the Department of Culture, Media and Sport. But of the
thousands of online casino operators worldwide, only a handful – 14 the
last time I looked – have applied for one.

Why?
Because Brown decided to tax all British-based betting and casino sites
at 15 per cent of gross profits. Not surprisingly, they have chosen to
be based in much lower-taxed places, eg Malta, which taxes at a very
acceptable 2.5 per cent.

Ladbrokes has not
signed up for a British licence, nor has William Hill, which used to be
based in Curacao, but now has moved to Malta. Oh – and since Malta is
in the European Economic Association, it will be allowed to advertise
on television.

So now we have the most caringly
protective online betting regulatory system in the world, hurrah. But
none of the big boys will sign up to it. Boo. (The Isle of Man is
laughing its head off.)

Of course, the companies
that do sign up will be taxed at 15 per cent gross. But there aren’t
enough of them even to pay the salaries of the 50 new compliance
managers recruited for the Department of Culture, Media and Sport.

We might actually be able to go further as well. We might have a real, honest to God, example of the Laffer Curve on display here.

Now, yes, I know, it’s one of those appalling right wing heresies to state that the Laffer Curve even exists, let alone that it has any relevance to the actual range of tax rates that we have.

Except that, the existence of the curve is indeed true, as you will find when you actually probe even just a little bit. The unknowns are what shape it is and thus what are the tax rates which maximise revenue collected. And, if we are to be honest about it, that shape and thus that rate will be different for different taxes, on different things, and within different institutional and legal structures.

Here we have something highly mobile: essentially, where is the brass plate for a web site whose real existence is in cyberspace. We’re pretty sure that the revenue maximising rate is going to be lower here than it is for something less mobile, like, say, labour.

But look at how low the rate is when we’re already to the right of the peak of the curve. Only 15%! A rate as low as that not only doesn’t produce net revenue, it actually leads to a loss to the Government coffers, as the costs of the scheme are higher than the revenues. This tax rate is not just not raising money to spend on schoolsn’ospitals, it’s actually making us all poorer.

Now no, I don’t think that the revenue maximising rate (at least in the short to medium term) on labour income will rise if the income tax rate was as low as 15%. It’s simply not as mobile as the registration address of a website. But, err, might anything else be? Financial capital perhaps? Or, even, in a less strong formulation, might capital be more mobile than labour and yet still less so than a website?

So that, in order to get the most to spend on schoolsn’ospitals, which is, after all, the aim of taxation, we should tax capital less than labour? And that perhaps 15% is too high a tax rate?