The threat of a possible £66 million loss in revenue each year has led the British Horseracing Authority (BHA) to label the government’s proposed gambling tax reform as the ‘gravest risk’ in the sport’s history.
The organisation has called upon all racing stakeholders to lobby ministers to U-turn on plans to raise the amount of tax paid by bookmakers on racehorse bets – which in turn will lead to a smaller sum being paid into the sport’s levy fund; that is considered an essential life-force for the sport.
Without it, the BHA argues, horse racing will be hit with its most challenging conditions in decades which could have far-reaching ramifications for the sport.
Axe the Racing Tax
Under governmental proposals put forward by the Treasury, all gambling operators will pay a single rate of tax – that is currently 21% on gross revenue.
This harmonisation will see online bookmakers, who are currently taxed at a rate of 15%, face an uptick of 6% – bringing them into line with the current 21% tax threshold paid by online casinos and other providers of games of chance.
However, there are those who believe that betting on sports should be treated differently to games of pure chance – with a regulatory system that recognises as such.
And that’s particularly the case for horse racing, which relies on the betting levy – paid by bookmakers on their annual revenues – so heavily as a vital source of funding. It’s thought that around £350 million flows from betting operators to the sport, which is then divested into prize money, track maintenance and veterinary research.
According to BHA estimates, the 21% tax rate would hit racing to the tune of £66 million. But it’s not impossible that the government could increase the threshold beyond that, with projected losses of £97 million a year if gambling duty is set at 25% and a whopping £160 million if increased to 40%.
And there could be further associated costs, too. Betting firms will have less money in their coffers if paying higher tax, which in turn may hit their marketing budgets – meaning that fewer would be willing to stump up the cash to sponsor individual races and entire meetings alike.
As a response, the BHA has launched its ‘Axe the Racing Tax’ campaign, calling on racing’s stakeholders to write to their local MP to challenge the possible tax reform.
The Treasury’s consultation period ends on July 21, although minister James Murray has spoken of his ‘commitment’ to help racing avoid the unwanted side effects of a gambling tax overhaul.
Brant Dunshea, the acting chief executive of the BHA, has called upon ‘everyone working in racing’, as well as media figures and individual punters, to support the Axe the Racing Tax campaign.
“The Government’s consultation on harmonising online betting duties, if followed through, poses one of the gravest risks to racing the sport has ever seen,” Dunshea said.
“It will punch a huge hole in racing’s finances, risk thousands of jobs across Britain and threaten the future of the country’s second most-popular sport and a cherished national institution.”
Unintended Consequences
Speaking in the Commons Chamber on Tuesday, Murray was questioned on the harmonised gambling tax plans by the Doncaster MP, Sally Jameson.
Having been challenged on the ‘potential impact’ of a flat tax regime by Jameson, Murray responded by stating:
“We very much recognise the social and cultural value of horse racing, which is why on-course betting is exempt from duty, and horse racing is the only sport to receive a government mandated levy.”
“We are consulting on measures to simplify gambling duty and improve compliance. No decision will be made on rates before the Budget, and we are working with the horse racing sector to identify unintended consequences and mitigations,” Murray concluded.
He stopped short, however, of answering Jameson’s question on whether horse racing betting should be considered ‘very different from online casinos and games of chance.’
However, an unintended consequence of the government’s embarrassing climbdown on its proposed welfare reforms is that they will need to source finance from elsewhere to plug the widening gap in the Treasury’s coffers.
The Labour Party, whose popularity is waning with each passing week, would be loathe to raise taxes on individuals and households, so will therefore look for ‘easy wins’ elsewhere – hiking taxation on the gambling sector would be one obvious edge for ministers to exploit.