Gambling giant Flutter Entertainment has taken unprecedented action in the American state of Illinois after regulators instigated significant tax hikes.
Now, punters in the Prairie State will have to pay a $0.50 surcharge on every bet they place… even if the amount staked is less than $0.50.
It’s raised fears that Flutter, who operate Paddy Power, Betfair and SkyBet, will introduce a similar levy on customers in the UK if the government proceeds with its rumoured tax rises on the sector.
Substantial Hike
In the United States, Flutter operates FanDuel, which is one of the most prominent betting brands in the country.
But FanDuel customers are in for bad news due to the actions of the state legislature in Illinois. As part of a new tax regime, bookmakers will pay a levy of $0.25 on every bet placed – regardless of its size – up to the first 20 million wagers taken in the year.
After that, the tax will rise to $0.50 per bet.
It’s a move that could cost bookmakers an estimated $87 million (£64 million) a year, although it’s thought that only two firms – FanDuel and DraftKings – will qualify for the higher $0.50 rate.
When news broke of the proposed tax hike, DraftKings initially revealed plans to implement their own customer surcharge on bets. However, they backtracked and reneged on the scheme following overwhelming feedback.
However, there appears to be no plan on the part of Flutter to U-turn on their decision, unless decision-makers in Illinois agree to ditch the tax rise before its proposed July 1 start date.
Flutter CEO Peter Jackson claims that the surcharge could force some of his firm’s customers to the unlicensed black market – particularly lower-staking individuals for whom a $0.50 charge is out of kilter with their normal bet size.
“It is important to recognise that there is an optimal level for gaming tax rates that enables operators to provide the best experience for customers, maximize market growth and maximize revenue for states over time,” Jackson said.
“We are disappointed that the Illinois Transaction Fee will disproportionately impact lower wagering recreational customers, while also punishing those operators who have invested the most to grow the online regulated market in the state.”
Such a customer surcharge on bets is unheard of, and it’s no surprise that FanDuel’s prospects have been hit hard by the decision. Their share price fell 1% after confirming the introduction of the charge, while DraftKings – their main competitor in the United States – saw their stock market value rise 2%.
Will Flutter Follow Suit in the UK?
Although it should be reiterated that this surcharge will only be taken on bets placed in Illinois, there’s now the scope for the tax on punters to be rolled out in other states… and other countries, too.
Flutter, by refusing to absorb the cost of the tax hit themselves, are making their customers foot the bill – a stance that could be replicated in the dozens of jurisdictions they operate in should the government hike industry taxes.
Which brings us back to the UK, where an increase on gambling operators is expected in the near future.
Such plans were initially mooted in the government’s October budget, although the chancellor, Rachel Reeves, ultimately backtracked on the idea.
However, ministers have now confirmed that a new tax regime on the sector could be on the horizon, with a consultation ongoing that could see the rate of tax paid by bookmakers on their gross profits each year rise from the current 15% to at least 21%; the current level paid by online casinos and gaming sites.
That would cost betting firms tens of millions of pounds annually… could Flutter implement a surcharge on bets in the UK to cover these losses?
Such a move would push punters to the black market; that’s according to a survey conducted recently by the Betting & Gaming Council (BGC).
Of all the respondents they polled, a considerable 66% claimed that they would be interested in switching to an illegal, unlicensed bookmaker if the government raised taxes on betting operators.
Aside from the possibility of transaction fees like those in Illinois, punters fear that bookies will increase their margins and slash their odds in a bid to cover costs.
BGC CEO Grainne Hurst claimed that the survey results were a ‘wake up call’ for the government, commenting:
“It’s clear it [a tax hike] will not raise more tax, it simply risks forcing huge numbers of customers out of the regulated market, with its world leading standards on player safety, into the arms of the growing, illegal, unregulated and unsafe gambling black market online.
“Punters have been loud and clear: hit them with further taxes and they will walk away from sports like racing, straight to the black market.”