Analysts fear that plans for a gambling tax hike in the United Kingdom could actually backfire and lead to a reduction in income for the government.
Chancellor Rachel Reeves will unveil her autumn budget in November where she is expected to harmonise online gambling tax into a single rate.
As of today, online gambling is currently taxed in two categories with a general duty for racing and pool betting levied at 15% and a remote gaming duty that covers casino games and slot machines taxed at 21%.
Reeves is facing pressure from former Prime Minister Gordon Brown, who called on the Labour government to make the move in order to prevent a social crisis. The Institute for Public Policy Research (IPPR) believe raising gambling taxes could generate £3.2 billion extra per year.
However, analysts at Regulus Partners are far from convinced that’s the case and have questioned the maths and statistics used in Labour MPs’ support for the proposal. They believe that figure is much closer to £2.1 billion.
More than 100 MPs have written to Reeves to urge higher duties on the industry to fund scrapping the two-child benefit cap, which restricts child tax credit and universal credit to the first two children in most households.
Critics have raised concerns that the letter merges revenue with profitability and ignores the thin operating margins of many gambling businesses. Casinos and betting shops usually operate on margins of around 10% according to Regulus which means the tax hike could eliminate profit altogether.
Analysts fear this could lead to widespread closures, risking up to 80,000 jobs and reducing rather than increasing revenue for the government. The British Horseracing Authority believe it could cost its sport alone as much as £160 million.
Without addressing structural issues, large tax increases are expected to pour petrol on the rapidly-growing black market fire and make the regulated sector much smaller.
Joe Lyons is a betting industry writer for GamblingIndustryNews with years of experience on reputable gambling websites. Joe specialises in long form content in the world of sports betting and gambling. Joe is recognised as an expert in sports fields such as horse racing, soccer, NFL and NBA.
