Online gambling companies greeted the much anticipated budget speech by UK Chancellor of the Exchequer Gordon Brown with disappointment and even dismay last week, and reaction in the British business media reflected this.

Reuters said that gambling firms and casino operators were left disappointed by Wednesday’s budget after the Chancellor slapped higher tax on large casinos and did little to tempt Internet gambling onshore.

Internet gambling firms looking to locate back to Britain from tax havens such as Gibraltar and Cyprus were dismayed after Brown set the Remote Gaming Duty in line with land-based bookmakers and bingo firms at 15 percent.

Some had predicted it would be as low as two or three per cent.

“The Remote Gaming Duty has been set breathtakingly high, it will do nothing to attract the existing offshore industry onshore and it may indeed have the contrary effect,” said BDO Stoy Hayward tax principal Martin Dane.

“With the additional VAT and corporation tax for most companies, it would be almost impossible for a UK-based operation to compete with offshore businesses, especially those located in other EU jurisdictions,” said Remote Gambling Association chairman John Coates.

“This decision means that the UK has effectively turned its back on the industry,” he added.

However, some online gaming firms were more sanguine. “It’s not a surprise,” said a spokesman for PartyGaming.

Land casino operators were also dealt a blow after Brown scrapped the lowest tax rate for the smallest casinos and created a new, higher, 50 per cent tax band for the most profitable ones.

“I really get the feeling the government is trying to take the maximum rake out of this in terms of revenue raising,” said Dane.

Leisure firm Rank warned that the changes would wipe 20 per cent off the annual profits of its casinos.

It said profits of its Grosvenor Casinos, which brought in £39.5 million in 2006, would fall by £8 million a year as a result of the higher taxes, news that knocked Rank’s shares more than four per cent.

The move also means firms hoping to win the right to run any of the planned new wave of 17 Las Vegas-style casinos will have to do their sums again.

“It may well discourage operators from bidding (to run the new casinos),” said Deloitte Leisure partner Karen Potts.

“Some have probably been working on an effective tax rate of 20 to 25 per cent of duty and I would think this change could well put that up as much as 25 per cent.”

The Independent says changes in gaming duties could cost casino operators £100 million over three years and will do little to encourage online gambling companies to relocate to the UK, quoting industry experts.

Internet gaming companies were hoping the Chancellor would set a tax rate at around two to three per cent to encourage them to move back to Britain from tax havens in Gibraltar, Malta and Alderney. However, the Remote Gaming Duty was set at 15 per cent, in line with that for bookmakers and bingo halls. online gaming companies said the Chancellor had in effect shut the door on the industry.

Last year the Treasury earned £175 million from gambling duties. It has estimated an extra £35 million will be added from the new rates, even excluding money from the 17 new casinos planned. One industry insider commented that a licence fee would have made more sense.

What the budget means:

• The 2.5 per cent starting band of gaming duty has been scrapped.

• Remote gambling will not be liable for VAT

• 15 per cent remote gaming duty on companies moving from offshore to the UK

• 50 per cent tax band for casino operators with revenues above £10m