Industry and analysts push back against UK tax hike reports

Reported UK tax rises for the gambling sector have been met with pushbacks and surprise from politicians and industry figures, as publicly listed operators’ shares slumped yesterday, wiping a combined £2bn off their value.

Following a report from The Guardian, in which it claimed Labour is considering a £3bn raid on the industry by raising remote gaming duty from 21% to 50%, Monday saw a major stock sell off for Entain, evoke and Rank Group.

Shares in Flutter – the largest publicly traded online gambling company – tumbled 8% in New York on late-afternoon Friday (UK time) when the story was published.

The newspaper reported that the Chancellor of the Exchequer, Rachel Reeves, is considering recommendations from the Social Market Foundation and the Institute for Public Policy Research.

The Social Market Foundation’s main policy point is the doubling of remote gaming duty, or online casino tax, from 21% to 42%.

The body also reported yesterday, 14 October, that it had conducted a poll via Survation in which 52% of respondents agreed there should be an increase in online gambling tax.

The Social Market Foundation did not provide any details on how many respondents took part in the survey, or how and when it was conducted by Survation.

Institute for Public Policy Research’s recommendations were more wide-ranging than its fellow think tank, as it also suggested doubling general betting duty from 15% to 30% and raising land-based casino tax rates. It also recommends online casino remote gaming duty be hiked to 50%.

Last year, the Treasury collected £3.3bn in gaming taxes, or £2.2bn if excluding the National Lottery.

Sporting impact

Grainne Hurst, Betting and Gaming CEO, said: “The current speculation around taxes is being driven by anti-gambling campaigners, based on fantasy economics, and are simply not credible.

“I want to be very clear with government, any further tax rises now will not only slam the breaks on growth for our sector, but it will threaten jobs and completely derail horseracing.”

Speaking to City AM, the Conservative’s shadow sports minister, Louie French, said tax rises would benefit the black market and hamper horseracing.

He remarked: “If true, this would be a terrible error, hammering an industry that employs tens of thousands and invests heavily in British sport. 

“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, affecting everything from darts and snooker to football and rugby.

“Labour needs to take the blinkers off. This socialist tax raid would be self-defeating as firms close and the black market grows further, torpedoing a legal industry that already pays over £4bn in tax a year.”

Staying with horseracing, Arena Racing Company CEO Martin Cruddace told The Guardian the government should “urgently examine how it taxes and regulates betting on horseracing as opposed to online slot machines and casino games”.

And in an opinion piece, Racing Post editor Tom Kerr said: “It does not take a Milton Friedman to understand that a high-tax, high-regulation environment leads not to growth but contraction.

“The ‘easy win’ of taxing bookmakers to the hilt is nothing of the sort – and would spell disaster for British racing.”

Analyst takes

As per the FT, analysts have suggested that while the proposals would have a significant impact on the sector, the reality of such changes coming into play was unlikely.

Stock analyst at Jefferies International, James Wheatcroft, said: “The proposals apparently being considered would all but wipe out bookmaker profitability in the UK, per our estimates.

“The headlines highlight that changing tax (and regulation) is a legitimate concern when investing in gaming companies, but the extent of these proposals seems unrealistic.”

Barclay’s analyst Brandt Montour added: “While the article appears credible, the proposed changes (a doubling of most tax rates within one of the proposals) seem egregious to us, and will likely raise realistic concerns over anti-competitive impacts (most small operators would likely close down) as well as giving a substantial boost to the black market.”

Finally, a Regulus Partners note released yesterday highlighted the connection between major Labour donor Derek Webb and his funding of the Social Market Foundation as a potential reason why the government might not follow through with any tax rise.

The note read: “This time round, we believe it almost certainly is worth the bother, but anything more than a tweak would be damaging and self-defeating, in our view.

“A damaging and self-defeating tax raid cannot be ruled out, especially given the Labour donor connection, but there are reasons why the Treasury has not been so reckless before and we doubt they will be so reckless this time.

“It is also possible that after its rather accident-prone first 100 days in office, senior Labour politicians might think twice about linking policy so explicitly to donors without much stronger arguments for their efficacy.”