Recently, the UK Parliament's Finance Committee held a hearing where Carsten Ronge, an economic policy expert at the Institute for Public Policy Research (IPPR), pointed out that raising gambling taxes is insufficient to solve gambling problems and questioned the validity of using the Dutch case to prove that higher taxes lead to an increase in the black market. IPPR had suggested increasing the remote gambling tax from 21% to 50% and the slot machine game tax from 20% to 50%, aiming to increase tax revenue by £3 billion annually. However, Ronge emphasized that gambling demand is sticky, and a single tax policy has limited effects. Representatives from the Gambling Commission warned that the increase in remote gambling tax could also impact the operation of retail betting shops.
Expert Views and IPPR Tax Recommendations
At the hearing, Carsten Ronge from the Institute for Public Policy Research (IPPR) stated that increasing gambling taxes cannot fundamentally solve gambling issues. In August, IPPR advised the government to raise the remote gambling tax from 21% to 50% and the slot machine game tax from 20% of profits to 50%, anticipating an annual tax revenue increase of £3 billion. However, Ronge noted that gambling demand has strong stickiness, and while tax increases can boost revenue, they cannot effectively curb participation rates and should be complemented by other regulatory measures. Former Paddy Power co-founder Stuart Kenny advocated for higher taxes on high-risk products to prevent users from switching to online casinos.
The Dutch Case Controversy and Black Market Connection
Addressing concerns that higher taxes could expand the black market, Ronge believes the Dutch case is not directly comparable. The Netherlands implemented other regulatory reforms alongside raising gambling taxes, and its black market exceeding the legal market is the result of multiple factors. Ronge cited Estonia as an example, showing that low tax rates also have a high black market share, proving that there is no necessary correlation between tax rates and black market size. He emphasized that the UK's ability to combat illegal websites is leading, and complex legal procedures have not hindered regulatory effectiveness.
Impact of Remote Tax Increase on Retail Industry
Grainne Hurst, CEO of the Betting and Gaming Council (BGC), stated that the increase in remote gambling tax would directly affect the operation of retail betting shops. As operators use a unified profit and loss model, an increase in online business taxes would force companies to divert funds from retail operations, potentially leading to the closure of high street betting shops. Several operators have recently warned of a possible contraction in offline business, highlighting the chain effect of tax policies on the entire industry.
