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Britain is missing out on £250m a year in tax from online gambling profits made by high-street bookmakers and casinos.
That is according to a probe which reveals that the proceeds from lucrative and heavily advertised 'remote gambling' operations are disappearing into off-shore accounts in Gibraltar, Jersey and the Isle of Man.
Participants in avoidance schemes include established high street names such as William Hill and Ladbrokes, as well as web-based operators like Betfair and 888.
The total amount of money shielded by the gambling firms reportedly exceeds the amount avoided by Starbucks and Amazon, which have been heavily criticised for legitimately reducing their tax burden by using schemes.
The Independent, which probed the activity, estimated that the public purse had missed out to the tune of £1bn since 2009.
A loophole in betting duty rules is blamed for the situation. At present, gambling firms are taxed according to where they collect a bet, rather than where the gambler places it. So a bet placed by a punter on a computer in Britain is taxed not in the UK, but where the money is sent - the tax haven in which the bookmaker is registered as a company.
The government is set to close the 'offshoring' loophole, but not until 2015.
Explaining its decision to relocate to Gibraltar, Ladbrokes said it fled UK tax laws "reluctantly," and claimed to have paid £155 million in taxes in the UK in 2011. William Hill said that fierce competition from abroad necessitated its relocation to Gibraltar.
A Ladbrokes spokesman said: "In November 2009 Ladbrokes publicly announced it was reluctantly relocating its online operations to Gibraltar, stating that competing from the UK against offshore competitors with significant tax advantages had become untenable.
"The choice for our digital business was to remain in the UK and watch our customers continue to relocate to competitors or relocate to survive and compete."
William Hill denied it was involved in an avoidance scheme. A spokesman said: "In 2009 our online sports betting business was moved to be co-located with our online casino business in Gibraltar to enable William Hill to compete on level terms with international rivals, in an environment where margins are significantly less than in an equivalent retail business."