A report in the Guardian on Friday (11 October) said the government is considering a number of thinktank proposals to increase taxes and make up to £3bn (€3.6bn/$3.9bn) in gains. These include raising remote gaming duty (RGD) from the current rate of 21% to 50% and general betting duty tax on bookmakers from 15% to 30%.
While the government is yet to officially announce plans, the report suggests measures could be set out in the budget, which Chancellor Rachel Reeves is due to deliver on 30 October.
Despite many shrugging off the proposals as outlandish and unlikely to win government approval, the market yesterday saw gambling giants’ shares plummet, including leading UK players Flutter, Entain, Evoke and Rank Group.
Shadow sport minister Louie French described the proposals as “a terrible error” while speaking to CityAM. “Sharply doubling taxes on betting shops and online gambling sites risks wiping out firms’ profits. That means closures, job losses and a black hole in sports funding, affecting everything from darts and snooker to football and rugby,” he warned.
IPPR report is “Stalinesque in its approach”
Donaughue calls the Institute for Public Policy Research (IPPR) report “Stalinesque in its approach”. The document suggests the government could raise up to £2.9bn in 2025 by doubling taxes on “higher harm” products like sports betting and online casino, while leaving “lower harm” activities like the National Lottery as is.
“[It’s] full of restrictions and regulations that have no hard evidence of working and every chance of making people’s miserable lives a lot more miserable,” Donoughue says of the report.
The Betting and Gaming Council (BGC), meanwhile, warned the proposed increase could be compared to “draconian” regulations and “disproportionate” tax regimes being implemented elsewhere in Europe that are and will continue to push players into the black-market.
The trade body also raised concerns about the damage a tax hike could have on related sectors like horseracing. “I want to be very clear with government,” BGC chief executive Grainne Hurst said to the Racing Post. “Any further tax rises now will not only slam the brakes on growth for our sector, but it will threaten jobs and completely derail horseracing.”
A more reasonable gambling tax increase is expected
Generally, the industry does not expect the government to approve either of the proposals mentioned in the report.
“A damaging and self-defeating tax raid cannot be ruled out, especially given the Labour donor connection, but there are reasons why the Treasury has not been so reckless before and we doubt they will be so reckless this time,” says Regulus Partners in a blog post.
The gambling consultancy does believe the sector can afford to pay slightly more in tax, but only through a minimal increase, such as raising RGD to 25% from its current rate of 21%.
“These tax increases can only be genuine ‘tweaks’ to work effectively – possibly raising another £300m (RGD up 25% to 25% GGR), but certainly not anywhere close to another £1bn – the usual starting point of Treasury rounding,” they said.
But, Regulus asks, it is even worth the hassle to raise such a small sum by government standards?
“We believe it almost certainly is worth the bother, but anything more than a tweak would be damaging and self-defeating, in our view.”
Report has been taken “surprisingly seriously”
Alun Bowden, senior vice president for strategic insight at Eilers & Krejcik Gaming, is of a similar viewpoint. He wrote on LinkedIn that the reported rise has been taken “surprisingly seriously”.
Although he believes such a high tax increase is a “pretty unlikely outcome”, he does suggest a more reasonable tax bump could be on the cards.
“I’ve been saying for a long time that a rise in online gambling tax rates feels inevitable and am far from alone in that and we may see them nudged up a bit either in this budget or the next,” Bowden said.
“Sports betting can afford to flex up a bit and 15% is fairly low in a wider European context, while online casino is still at a reasonable enough level. This all drops to the bottom line obviously, but there’s a bit of tinkering you can do to mitigate it especially around bonusing.
On a more believable tax hike, Donoughue said the Treasury themselves has said a 29% gaming duty could further black market proliferation. “So that would be a logical ceiling,” he said.
What about the share prices?
As a result of the bullish response, there has been some level of recovery to gambling share prices today.
Entain, which was down around 15% yesterday, bounced back from the initial drop and is now trading 7% down on last week’s closing price. Playtech was down 13% yesterday but is now more or less back at its opening price.
However, the same cannot be said for Evoke. At the time of writing, Evoke is down over 16% for the week so far, with share price falling further today (15 October).
Flutter, meanwhile, rallied yesterday but has seen a downward trend so far today.
Original article: https://igamingbusiness.com/finance/industry-reacts-gambling-tax-increases-britain/
