The new Labour government has already taken some bold steps early on in their time in office, and reports suggest they are plotting more controversial steps ahead of their autumn Budget.
According to the chancellor, Rachel Reeves, the UK economy has a £22 billion ‘black hole’ that it needs to shore up in a bid to improve public services like the NHS.
And one partial solution, which has reportedly been backed by ministers and one of the Labour Party’s most influential – and anti-gambling – donors, is to increase taxation on UK gambling firms….which could see them pay a staggering £3 billion more in tax per year.
Tax Grab
Reeves will, of course, have to make some tough decisions in a bid to close off that so-called financial black hole.
The gambling industry is a particularly easy target; particularly when newspapers and media firms continue to publish the annual earnings of key sector players. One senior executive’s £220 million take home pay does not exactly foster feelings of sympathy from the general public, whether earned fairly and squarely or not.
And that sentiment was confirmed by a government source quoted in The Guardian, who revealed that the tax grab is appealing as there would be ‘no obvious pushback’ opposing it.
If Reeves decides to press on with plans to increase the amount of betting and gaming tax paid by UK-facing operators, it could generate a conservative £1-3 billion in additional revenue for the coffers within a single year.
It’s thought that the most likely targets will be those operators who provide ‘higher harm’ products, with online slots and roulette providers expected to be amongst those to endure tax hikes of up to 50% of their annual revenue (up from 21% as it stands now).
However, sports betting firms and bookmakers are unlikely to go unscathed through any changes. They currently pay 15% tax on their profits as betting duty, but that could be increased to 25% or even 30% as part of the chancellor’s plans.
According to those in the know, so-called ‘lower harm’ products, such as the National Lottery, may avoid tax increases altogether.
Unsurprisingly, the stock market has responded unfavourably to the news – the fear of £3 billion in lost profits has seen £2 billion wiped from the share value of Flutter, Entain, Evoke and others in just a matter of days.
The government’s decision will likely be informed by the input of Derek Webb, the so-called ‘poacher turned gamekeeper’ that has donated more than £1 million to the Labour Party.
He’s a former professional poker player and casino game developer who now sits on the other side of the fence, campaigning for tighter legislation in the industry. Webb is likely to be a factor in any decision that Labour makes, such is his financial importance to the party.
Meanwhile, the Conservative’s shadow minister for sport, Louie French, has hit out at Labour for ‘torpedoing’ the gambling sector, with any increase in taxes likely to see betting firms miss out millions in profit each year.
“This would be a terrible error, hammering an industry that employs tens of thousands and invests heavily in British sport,” he said.
“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.”
Falling at the First Hurdle
Labour’s popularity since taking office has plummeted, with Reeves’ Budget announcement on October 30 unlikely to help matters to that end.
And French noted that any tax hikes for the gambling sector that are introduced in the Budget will have consequences for an unintended victim: the sport of horse racing.
“It would be a catastrophic blow to Britain’s much-loved race tracks, which rely on gambling for income,” he said.
“The racing industry would shrink without millions of people enjoying a flutter on the horses. But Labour’s tax would sink betting firms, depriving the industry of money.”
There’s also the possibility that the lost revenue of a tax grab will force bookmakers to increase the margins on their horse racing odds – forcing price sensitive punters to the exchanges or even the black market.
Martin Cruddace, the CEO of the Arena Racing Company, has called upon the government to separate sports betting from casino games of pure chance in their revised taxation scheme.
“Speaking on behalf of all British Racing’s stakeholders, I can say it is only right that the new government urgently examines how it taxes and regulates betting on horse racing as opposed to online slot machines and casino games,” he said.