It seems Labour will not rest until the gambling industry is dead and buried. In the latest attack, more than 100 Labour MPs have signed a letter to Chancellor Rachel Reeves calling for significant tax rises on ‘harmful online gambling products’. The letter, written by MPs Alex Ballinger and Beccy Cooper, both members of the All Party Parliamentary Group for Gambling Reform, suggests that the revenue should be ‘ringfenced to help address child poverty and related harms.’
We risk seeing an exodus of gamblers from mainstream bookmakers
The letter follows an intervention by Gordon Brown, who described raising gambling levies as a ‘straightforward Budget choice’. The former prime minister has come out in support of the Institute for Public Policy Research think tank, which believes that the tax rises it proposes – 50 per cent on online casinos (from 21 per cent); 50 per cent on in-shop slots and gaming machines (from 21 per cent); and a 25 per cent General Betting Duty (from 15 per cent) – would generate around £3.4 billion extra per year for the Treasury by 2030. On top of this, the government is threatening to increase the rate of tax paid by bookmakers on horse racing bets from 15 per cent to 21 per cent.
It all sounds sensible enough: hammer the nasty bookies and alleviate child poverty. Who could possibly argue with that? But look more closely at the numbers – and the possible consequences – and a different picture emerges.
The letter from Labour MPs points out that similar tax rises on online casino games have been introduced around the world. But perhaps the most interesting example is the Netherlands, where gambling taxes have risen to 34.2 per cent. What the letter doesn’t say is that tax revenue on gambling in the Netherlands is actually down 25 per cent on the previous year: a €200 million shortfall.
The website iGaming Business notes: ‘When taxes increase on gambling operators, they often pass additional costs on to their customers. This could manifest in higher betting odds, higher fees or less attractive bonuses and promotions. As a result, players may turn to the more lucrative but also riskier unlicensed market.’
So what we risk seeing here in the UK is an exodus of gamblers from mainstream bookmakers. They will instead place bets with unlicensed operators, who pay no tax at all. Added to this, these black-market bookmakers will not be regulated and will therefore have no incentive to spot – and help – problem gamblers. What we are left with is less revenue for the Treasury and fewer safeguards for vulnerable gambling addicts.
Paul Leyland of industry analysts Regulus Partners says the prohibitive rate of tax in France, far from being an aspirational model, should serve as a stark warning to the Chancellor: ‘The French betting rate of 55 per cent comes with one of the largest acknowledged black markets in Europe, which also recognises that 79 per cent of the turnover of the illegal offering market is generated by players with problematic practices.’
The letter from MPs is careful to exclude horseracing from these proposals, describing it ‘not only as a sport of cultural and historical significance but also [one that] supports approximately 85,000 jobs’. But it should be self-evident that if bookmakers are forced to close their shops (and Leyland predicts only 20 per cent would survive these tax rises) horseracing will be hit hard – possibly ruinously so.
Greg Knight, managing director of Jenningsbet, told the Racing Post: ‘It’s the worst idea I have ever heard of in terms of betting taxation because the idea that we are all going to sit there, carry on our business and just make a little less profit is absolutely foolish… The carve-out for racing would be entirely meaningless because the demise of shops would mean catastrophic reduction in levy, media rights and sponsorship. It’s the death knell for racing as well as high street bookmakers.’
Gambling is not an industry with many friends and I can understand why MPs might see it as an obvious target for tax rises. The idea of hobbling William Hill and Paddy Power is no doubt appealing. But they should put their emotions to one side, look at the numbers with a clear head and realise that their proposals will rob the Treasury of funds, cost jobs on the high street, wreck horseracing and drive gamblers underground. Black-market bookmakers will be rubbing their hands in anticipation. What a mess.
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