The recent proposal for adjustments to the UK gambling tax has become a hot topic of discussion. The Treasury has proposed consolidating various online gambling tax rates into a single Remote Betting and Gaming Duty (RBGD), sparking widespread reactions from the industry and political circles. A radical proposal supported by former Prime Minister Gordon Brown, in particular, has significantly raised some tax rates, causing intense controversy.
The proposal suggests raising the remote gambling tax for online casinos from the current 21% to 50%, increasing the slot machine tax rate from 20% to 50%, and raising the general betting tax for non-horse racing gambling from 15% to 25%. Currently, the remote gambling tax, which covers online slots, poker, and bingo, is levied at the point of consumption (POC) at a rate of 21%. General betting tax varies by sub-sector, with fixed odds betting at 15%, sports spread betting at 10%, and financial spread betting at 3%. The pool betting tax is also 15%, but only applies to sports pools, excluding horse and dog racing.
Reactions and Controversies
Gambling operators quickly expressed opposition to the proposal. The British Horseracing Authority also expressed concerns that this move would increase the already challenging burden on the horse racing betting industry. Various politicians have expressed differing opinions on this issue.
Labour MPs Alex Ballinger and Dr. Bessie Cooper wrote in The Guardian supporting the increase in gambling taxes, noting that this industry, with an annual output value of £11.5 billion, enjoys a VAT exemption and pays a much lower tax rate compared to some countries in Western Europe and the US, where rates range from 35% to 57%. They pointed out that the tax rates for cigarettes and alcohol are as high as 80%, while gambling causes social harm that costs the UK National Health Service (NHS) and other public services over £1 billion annually.
However, industry analysts warn that raising tax rates could force operators to lower odds, potentially driving players towards the illegal black market. Flutter CEO Peter Jackson told The Daily Telegraph that higher taxes do not equate to increased tax revenue, "After the Netherlands raised gambling taxes, tax revenue actually decreased, and the government is currently facing a tax shortfall of about 200 million euros."
Shadow Cabinet Minister Louis French also criticized the move, arguing that significant tax increases not only jeopardize jobs but could also impact the sports industry.
The Tax Policy Associates think tank pointed out that IPPR's tax revenue growth forecast is overly optimistic and flawed in its calculation methods. The organization emphasized that IPPR's estimates are based on a static model and do not consider the actual situation where operators might pass on the tax burden by lowering odds, hence the estimated tax revenue could be much lower than £3 billion, possibly only half.
The report noted: "The core issue with 'sin taxes' is that the tax burden is often borne by consumers, not the businesses selling the 'sins'. We must clarify whether the goal of taxation is to increase fiscal revenue or to reduce harm."
It is worth noting that Brown's proposal is not the official stance of the Labour Party, and some party members, such as Glenrothes and Mid Fife MP Richard Baker, have called for caution regarding excessive tax burdens. The public consultation on the new unified Remote Betting and Gaming Duty (RBGD) scheme ended on July 21, and its future direction remains to be seen.
