After months of speculation, the chancellor’s Autumn Budget is just a week away.
Rachel Reeves will announce her plans to shore up the UK’s financial future next Wednesday, with a hike in gambling tax one of the hottest talking points.
Initially, it was thought that she would introduce a blanket increase on all gambling tax. However, the Financial Times is reporting that their sources have learned that online sports betting will be subject to a ‘slight’ increase in tax – with a complete reprieve for horse racing and wagers taken in high street betting shops.
But the news is unlikely to be as positive for online casinos, who could still face significant tax raids in the weeks and months ahead.
Footing the Bill
According to the Financial Times, the UK government is plotting a ‘two tiered’ system of gambling tax in the Budget.
Under the current system, bets placed on sporting events are taxed at 15% of gross revenue. And that will remain the case for all flutters placed on horse racing, which reports suggesting that the sport will avoid the hikes that would have likely threatened its financial viability.
In a positive and unexpected twist for the UK high street, betting shops will also be exempt from any tax rises – so, bets placed on all sports over the counter will still be taxed at the 15% rate.
However, it’s thought that Fixed Odds Betting Terminals (FOBTs), which have been considered controversial for a number of years, will be subject to an increase from their current tax rate of 20%.
The same rules aren’t expected to apply to online sports betting, although further details are yet to be speculated upon. Treasury insiders have reportedly told the FT that online bets will face a slight increase in taxation, although a specific figure hasn’t been mooted.
As for online casinos and sports operators offering slots, roulette etc, change is afoot. The current rate of tax paid on revenue is 21%, but there is an expectation that this will be increased significantly when the chancellor reveals her budget next week.
It has been suggested that there is a funding hole of around £25 billion in the UK economy, although plans to increase income tax have reportedly now been shelved.
But the gambling sector, one way or another, is likely to foot some of the bill.
A Sigh of Relief
The online casino sector generates more in taxable revenue each year than sports betting, with estimates putting the annual gross gambling yield in the UK at more than £4 billion.
So by increasing tax on slots and table games, the chancellor will be able to claw back more than £1 billion for the economy each year – without having to upset anyone in horse racing, who have come out in force to protect their sport from what could have been a crippling tax grab.
Pro-racing campaigners believe that a sport that generates £4 billion in economic gains per year, plus £300 million in taxable revenue, should be protected from further tax hikes at a time when other challenges, including field sizes and the closure of training facilities, are harming racing.
Lobby groups have suggested that online slots and FOBTs are more addictive than sports betting, with theories – not necessarily backed up by research, yet – that quick-fire games produce a higher rate of potentially destructive ‘binge’ gambling.
High street betting shops will be hit by a tax increase on FOBTs, which account for around 10% of all revenue generated in some locations.
There is concern amongst the casino sector though, with Rank Group leader John O’Reilly – whose company operates Grosvenor Casinos and Mecca Bingo halls – predicting that as many as a third of their properties could be forced to close if taxes are increased… resulting in the loss of around 2,500 jobs.
For sports betting-centred firms, avoiding a generalised tax increase will be considered a major win – especially as some brands, notably Betfred, had warned of mass closures and thousands of redundancies if the government went in that direction.
Paddy Power will close 29 of its shops in the UK and Ireland this month, although the firm has claimed that these were business decisions taken before news of the possibility of gambling tax hikes had been published.
All told, if the Financial Times sources are correct, the gambling industry as a collective may breathe something of a sigh of relief – feeling, perhaps, that they have gotten off lightly compared to what might have been.
However, there are still likely to be significant challenges ahead – particularly for the casino sector.