Rep. Brown-Waite Oblivious To WTO Violations Regarding UIGEA

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One of the last questions coming out of the House Ways and Means hearing on Wednesday discussing taxation of online gambling was from Rep. Ginny Brown-Waite of Florida. The legislator was concerned the new regulations and taxation would become a target for the World Trade Organization.

The question that was asked by Rep. Brown-Waite was, "Wouldn't there be WTO considerations if we put in some sort of a prohibition other than that authorized by one or both of these bills, wouldn't there be a WTO challenge specifically because we are impairing trade to another country."

For those who have been following the online gambling industry in the past couple of years, this question seems a little late. In fact, the Unlawful Internet Gambling Enforcement Act that was created in 2006, places the US in direct violation of World Trade Organization's General Agreement of Trade and Services.

On June 10th of 2009, the European Commission released a report, alerting the US and the rest of the world that the country was in violation. The Commission had been investigating the UIGEA and possible enforcement of the law since March of 2008.

"The investigation has established the existence of an obstacle to trade in the sense of the Trade Barriers Regulation," the report read. "Moreover, the investigation has shown that adverse trade effects within the meaning of the Trade Barriers Regulation exist and have been caused by the obstacles to trade identified. Finally, the investigation has concluded that action is necessary in the interest of Community."

That action could come in the way of sanctions. Instead of immediately taking their case to the WTO, the European Commission instead gave the US a grace period to correct their violations. To date, the US has not complied.

Representative Barney Frank understood the violations and the need for Internet freedom last year when he offered legislation to overturn the UIGEA and set up the groundwork for a regulated online gambling industry in the US.

On Wednesday, the House Ways and Means Committee held a hearing on Rep. Jim McDermott's companion legislation to Frank's bills. McDermott's legislation had to deal with the taxation of online gambling. The hearing was expected to be simply about taxation, but early on, it became apparent that the legality of Internet gambling was on the minds of many legislators present.

By the end, the entire hearing had turned into a referendum on Internet gambling, yet some lawmakers came unprepared. When asked the earlier referenced WTO question from Rep. Brown-Waite, Chris Wagner, representing the IRS, responded, "It's possible, it's beyond tax implications, I wouldn't be able to speak on that."

The question alone should have some wondering if the upcoming debates will have anything to do with online gambling, or if they will just be another example of partisan politics at its best.

The answer, Rep. Brown-Waite, is that the US is already in violation of WTO agreements. Any Internet gambling regulations will help, not hurt relations with other countries, and they may even lead the WTO to forgive the country for creating the ill-conceived UIGEA in the first place.

May 20, 2010
Posted By Tom Jones
Staff Editor, CasinoGamblingWeb.com
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