Our approach to tax
The Entain group of companies is a leading multinational sports betting and gaming business. We offer sports betting, casino, poker and bingo and operate some of the industry’s most popular brands including bwin, Coral, Gala, Ladbrokes, partypoker, Party Casino, and Sportingbet.
Tax is very important to Entain – it is our number one cost. In 2019 we paid £927 million of taxes globally, of which £507 million was in the UK.
The Group’s effective total tax rate (measured as all underlying taxes paid as a percentage of underlying operating profits before those taxes) was 64% in 2019.
The taxation of betting and gaming is complex – the Group is subject to a range of taxes, duties and levies in many of the countries where we have operations or in which our customers are located. We believe that tax revenue is vital in paying for essential public services, and for promoting economic prosperity and social stability. We recognise that our contribution to governments and national finances through the taxes we pay is important and significant.
Our approach to tax is guided by four principles:-
- Accurate and timely compliance with tax law in all the countries in which we operate;
- Engaging with tax authorities with honesty, integrity and respect, and engaging constructively in debates regarding the development of tax legislation and policy;
- Being transparent in the reporting of our tax affairs; and
- Achieving sustainable returns for our shareholders.
We apply these principles in practice through the following mechanisms:
Management and governance of tax risk
The Group’s tax strategy is approved annually by the Board of Directors. Responsibility for the execution of the Group’s tax strategy is delegated to the Chief Financial Officer who reports the Group’s tax position to the Directors on a regular basis.
The taxes and levies imposed upon betting and gaming companies have changed considerably over time, and the levels of taxation and/or levies to which the Group is subject may change in the future. The Group’s geographical diversity and the nature of taxation of our industry lead to considerable complexity in our tax affairs. In order to mitigate the risks that arise, the Group actively identifies, evaluates, manages and monitors its tax risks. The Group has an appropriately qualified and resourced tax team to manage its tax affairs. In addition, where there is significant uncertainty or complexity in relation to a tax risk, the Group may use the services of external, expert tax advisors.
Our attitude towards tax planning
We look to manage our tax affairs to support our business with the aim of ensuring that the tax consequences of our business operations match with the economic and commercial consequences of those business operations.
Where a tax rule, regulation or incentive exists that may convey a tax advantage to our operations, such as tax depreciation from investing in our business, we may use that rule, regulation or incentive to support our business. In many countries, such rules operate automatically by law. For example, the Group has significant brought forward tax losses, and the Group will use those brought forward losses to partially offset its current year taxable profits where the law provides for this.
The group will not enter into tax planning arrangements or structures that set out to achieve results that are contrary to the intention of the relevant legislation or which seek to exploit shortcomings within the relevant legislation.
Engaging with tax authorities
The Group will seek for all of its engagement with tax authorities to be conducted with honesty, integrity, respect and fairness and in a spirit of co-operative compliance.
We recognise that there may be areas of differing legal interpretation between the Group and the tax authorities. Where this occurs, we will engage with the tax authorities to try to resolve the matters in a cooperative and expedited manner. Where a conclusion cannot be reached in such a manner, the Group may choose to litigate the issue through the relevant legal system.
Where we believe it might affect our business or industry, the Group will engage constructively in the debate regarding the development of tax legislation, policy and administrative guidance.
A global view
Entain is a truly global business with more than 20 leading brands, accepting bets in more than 30 languages and more than 40 currencies. The business therefore operates with a global structure through more than 20 offices around the world.
Although Entain plc is incorporated in the Isle of Man, it is managed and controlled in the UK and, as a result, is tax resident in the UK (not the Isle of Man).
As a multinational company operating in a regulated industry, decisions on the location of our offices are influenced by a wide range of factors including:
- The regulatory and licencing regime;
- The stability and predictability of the political, social and tax environment;
- The availability of relevant skills within the local labour force;
- Labour costs, and the cost of operations; and
- The quality and reliability of communication networks.
As an acquisitive group, our global footprint is also a result of business acquisitions that have taken place.
Some of the key territories we operate from, and their activities, are:
- United Kingdom – Our large retail estate, business support operations, and corporate functions employs approximately 17,000 people.
- Gibraltar – Our largest online businesses are headquartered in Gibraltar, where they are managed and supported by over 1,000 employees.
- India – Providing technology support and back office services we employ over 1,300 people.
- Philippines – Over 800 employees provide customer services and other support services.
- We also have over 3,000 employees in other key offices including Australia, Austria, Belgium, Bulgaria, Georgia, Ireland, Israel, Italy, Malta and Uruguay either servicing local markets or providing group wide support services
- The Group’s intellectual property, specifically its technology and brands, are held by its main operating entities with appropriate license arrangements for use by other regulated and licenced entities.
All governments set tax regimes to meet their own priorities and policy objectives. The statutory corporation tax rates in our key territories range from 10% (Gibraltar) to over 30%. In the context of our international operations, the Group does not enter into artificial arrangements to move profits from one country to another and will only adopt business structures that reflect genuine commercial and operational activities. We ensure that all of our intercompany transactions are undertaken on arm’s length terms, our transfer pricing methods comply with the Organisation for Economic Co-operation and Development (“OECD”) transfer pricing guidelines, and these methods are consistently applied.
The Group’s effective tax rate is a function of a number of factors including the mix of how much profit arises in each country and each country’s statutory corporate tax rate. Other key factors that determine the Group’s effective corporation tax rate for accounting purposes include reassessments of the recoverability of deferred tax assets (relating to losses, interest and fixed asset timing differences) and the occurrence of income not taxable or expenses that are not deductible for tax purposes such as goodwill impairments and costs relating to corporate transactions (M&A etc).
However, for most companies, including Entain, corporate tax only accounts for a small proportion of the business’s total contribution to national and local government. Furthermore, taxation is not the only way that governments raise revenue from business. Another mechanism used to raise revenues particularly from betting and gaming companies, is licensing regimes. These can be substantial and important for local markets, and so it is essential to take these payments to the public finances into account when assessing the company’s contribution.
The main payments we make are:
Taxes on betting and gaming revenues
The group’s largest contribution comes from betting and gaming duties. These are charged on our revenues and are normally payable in the country where our customers are rather than the country where our business operations are based. We include in this category VAT and other sales taxes where these are calculated based on our revenue.
The Group incurs VAT and other sales taxes on goods and services that it purchases. In many jurisdictions, betting and gaming is exempt from VAT and sales tax which means that our business cannot recover the VAT and sales taxes it incurs, making them a cost to the Group.
These are the payroll taxes, such as national insurance and social security, that the Group pays as an employer.
The Group pays corporate tax on taxable profits calculated under the relevant laws of the jurisdictions in which we have a taxable presence.
Other taxes and payments to government
There are many other taxes paid by the Group including property taxes such as business rates, environmental taxes such as climate change levy, and license fees.
Effective total tax rate
The Group’s effective total tax rate (measured as all underlying taxes paid as a percentage of underlying operating profits before those taxes) was 64% in 2019. This means that for every £100 of operating profit (before taxes) the Group makes, £64 was paid out in taxes, leaving £36 for financing costs, investment and shareholder return.
Total taxes paid by the Group in 2019 (excluding exceptional payments/repayments relating to historic tax litigation) were as follows:-
Entain plc regards this publication as complying with the duty under paragraph 16(2), Schedule 19, Finance Act 2016.