The UK gambling industry is bracing for potential tax increases as speculation grows ahead of the Labour government’s upcoming budget announcement on October 30. Sources close to the Treasury have revealed that Chancellor Rachel Reeves may introduce higher taxes on gambling operators to help close a £22 billion fiscal deficit.

Currently, the UK’s remote gaming duty stands at 21% of operator profits, following a 2019 increase from 15%. General betting duty, applicable to traditional bookmakers, sits at 15%, as does pool betting duty. However, proposals from influential thinktanks suggest that significant changes to these rates could be on the horizon, sparking concerns within the gambling sector.

Two Proposals Could Raise Gambling Taxes

Two key proposals are at the heart of the discussions. The first comes from the Institute for Public Policy Research (IPPR), which is pushing for a doubling of taxes on higher-risk gambling products like online casinos and sports betting. Under the IPPR’s plan, remote gaming duty could rise as high as 50%, a move that would drastically impact online gambling operators. This proposal alone could raise to £2.9 billion by 2025, with the IPPR suggesting that “lower harm” activities such as the National Lottery and bingo would remain unaffected.

A second, more moderate proposal is being developed by the Social Market Foundation (SMF), which suggests increasing remote gaming duty to 42%. This plan is estimated to generate an additional £900 million annually for the government. Dr. Aveek Bhattacharya, research director at the SMF, noted that online gambling operators have long benefited from lower tax rates in the UK compared to other countries and argued that higher taxes would reflect the social costs associated with gambling.

Industry Response and Economic Impact

These potential changes have sent shockwaves through the industry, with share prices of major gambling companies plummeting following reports of the proposed hikes. Entain, the owner of Ladbrokes, saw its stock drop by 15%, while Flutter, which owns brands like Paddy Power and SkyBet, experienced an 8% decline. Playtech, Rank Group, and Evoke also saw significant drops in their share prices.

In response to the reports, the Betting and Gaming Council (BGC) expressed deep concern about the impact that such tax increases could have on the industry. BGC CEO Grainne Hurst stated, “The current speculation around taxes is being driven by anti-gambling campaigners, based on fantasy economics, and is simply not credible.” She warned that further tax hikes could severely hinder the industry’s growth, jeopardize jobs, and derail the horseracing sector, which is closely linked to gambling revenues.

Hurst also highlighted the economic contribution of the gambling industry, noting that it generates £7.1 billion for the UK economy and contributes £4.2 billion in taxes while supporting 110,000 jobs. She cautioned that increasing taxes too sharply could push consumers toward illegal, unregulated markets, which lack the protections of the regulated sector. According to research cited by the BGC, 1.5 million UK adults wager up to £4.3 billion annually on the black market.

Outlook on the Tax Proposals

As the debate intensifies, some analysts predict that the government may opt for a more moderate approach rather than adopting the higher tax increases suggested by the IPPR. Goodbody analyst David Brohan has indicated that a remote gaming duty increase of 3% to 5% is more likely, given the economic importance of the gambling industry. Similarly, the investment firm Jefferies warned that extreme tax increases could wipe out the profitability of many gambling operators and pose an existential threat to smaller companies in the sector.

Should the UK proceed with significant tax hikes, it would follow in the footsteps of other European countries that have recently increased gambling taxes. For example, the Netherlands is set to raise its gambling tax from 30.5% to 34.2% in January 2025, with a further increase to 37.8% scheduled for 2026. Critics of the Dutch tax increase have argued that such moves could drive operators out of the market and increase consumer reliance on black-market gambling platforms.

With Labour’s first budget in 14 years on the horizon, the UK gambling industry faces a period of uncertainty. While it remains to be seen which proposals will be adopted, the potential for higher taxes is a cause for concern among operators and investors alike. As Hurst emphasized, “We want to partner with the government to see the right, proportionate regulations and a stable tax regime, which doesn’t hit customers, doesn’t raise the attraction of illegal operators and doesn’t derail the horseracing industry.”

Source:

Shares in UK Gambling Firms Fall on Fears of Higher Taxes in Budget, theguardian.com, October 14, 2024.

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