The government's desire for Britain to become the centre of the on-line gambling industry is possible to be dashed by its own unfavorable tax regime.
Ministers have repeatedly stressed the benefits of Britain becoming the prime location for what is known as remote gambling, including creation of jobs, improved regulation, increased revenue for the Exchequer and better protection for punters.
However, a report produced by Europe Economics for the Association of Remote Gambling Operators says the government's hopes "will not be realized."
"The tax liabilities British-based operators would face are likely to be too high."
A number of other jurisdictions including Malta, the Isle of Man, Alderney and Gibraltar are alluring remote gambling operators with favorable tax and regulatory regimes.
"The opportunity to regulate remote gambling operators might be lost if regulations and taxes are set with no regard to the commercial realities facing operators," the report warns.