SOURCE: Reuters

(London, England) — The betting and gaming industry expects Chancellor Gordon Brown to impose a number of tax changes when he delivers what is likely to be his last budget on Wednesday.

Analysts say Brown will try to tempt online casino gaming firms like PartyGaming (PRTY.L: Quote, Profile , Research) and 888.com (888.L: Quote, Profile , Research), currently based in offshore tax havens such as Gibraltar and Cyprus, back to Britain and within reach of the UK tax man with a new, low tax -- Remote Gaming Duty.

Expectations for the new tax rate range between 2 and 15 percent of revenue, although companies will also have to take into account the tax implications of paying their staff if they relocate back to Britain.

The move could lure online firms looking to rebuild their reputations in the aftermath of last year's decision by the United States to effectively outlaw Internet gambling.

One gaming executive, who asked not to be named, told Reuters firms would jump at the chance to move if the tax rate was right and if they thought the UK government would back them up as they look to overcome opposition to online gaming in other countries.

However, Betfair Managing Director Mark Davies told a recent conference online firms with well-known brands would not feel a UK domicile was necessary to prove their respectability and would need a bigger carrot.

The move could also disgruntle traditional bricks and mortar casino operators, whose profits can currently be taxed by as much as 40 percent. However, Brown could raise the level at which firms are taxed the highest rate as Britain gets ready to build a new wave of larger casinos.

Even the smallest of the planned casinos are four times bigger than most existing ones and duty payments for casinos operating under new licences are expected to rise significantly. Potential operators will also want clarification before they decide whether to submit bids to run the new casinos.

Traditional players could see the field levelled further if Brown decides to impose VAT on Web sites where players play against one another, such as poker, sooner than expected.

Bricks and mortar casinos and bingo firms already pay standard VAT on the fee they charge gamblers to play and although remote gaming sites also charge for participation, these fees are currently not taxed.

"This change could cause a number of operators to reconsider where they base their operations, with many considering a move to low-tax EU jurisdictions such as Malta to benefit from EU VAT rules," said Richard Dalton, a VAT specialist at accountancy firm Deloitte.