UK operators’ shares slump following tax hike reports

UK-listed operators’ shares plummeted this morning, Monday 14 October,  as the market reacted to reports the UK government is considering significant tax hikes for the betting and gaming industry.

Entain, evoke, Rank Group and Flutter Entertainment’s stock all slumped during early trading, with Flutter’s US shares also being hit on Friday after a Guardian report pointed to potential tax rises.

At the time of writing, Entain’s shares are down 10.1% to 689p and evoke is down 11.2% to 57.7p. Both companies are due to report Q3 earnings this week.

Rank’s stock has fallen almost 7% to 80.8p while Flutter’s UK shares have dropped 5.5% to 17,525p.

The Paddy Power parent company’s US shares were also caught in late Friday trading, slumping 8.8% to $219.50 (£168).

Per the report, Chancellor of the Exchequer Rachel Reeves could generate a further £3bn in tax income from the sector, which in turn would be used to plug the existing £22bn black hole in the country’s finances.

The Labour government came into power after 14 years, with Reeves claiming the previous Conservative government had allowed the deficit to continue to grow.

There are seven types of betting and gaming duty currently in place for UK operators: lottery duty, general betting duty, pool betting duty, gaming duty, remote gaming duty, bingo duty and machine games duty.

Labour is reportedly considering policy proposals from two think tanks in the shape of the Institute for Public Policy Research (IPPR) and the Social Market Foundation.

Under the IPPR’s plans, the think tank cited the tandem growth of the sector and gambling-related harm, as well as making direct reference to harm to children, among the core reasons for the tax hike.

And while the IPPR supports retaining the pool betting duty, lottery duty and bingo duty at 15%, 12% and 10%, respectively, the group has called for significant rises for other verticals.

General betting duty, which covers general or pool bets on horse or dog racing, is proposed to double from 15% to 30% of GGR.

Remote gaming duty, or the GGR tax on online casino, would soar from 21% to 50%. The current 21% rate was introduced in April 2019, upped from the previous rate of 15%.

The IPPR also suggested a gaming duty rise for land-based casinos at the top rate from 50% to 66% and a machine games duty top-level rise from 20% to 40%.

The think tank said these increases would generate £2.9bn in tax in 2025-2026, rising incrementally to £3.4bn by 2029-2030.

IPPR stated: “It is clearly unfair that when a product or service causes harm, the business responsible does not pay the full cost. Instead, much of it falls on individuals (who become sick), the NHS (which pays for treatment) and the wider business community (via reduced productivity).

“In effect, this amounts to a subsidy, particularly for industries associated with high or rising health harms, including gambling, tobacco, ultra-processed food, alcohol and private-rented housing.

“Or, in more classic economic terms, it is a negative externality that British politics and policymaking have grown accustomed to tolerating rather than fixing.”

According to the Guardian, the Social Market Foundation’s proposal is centred around a doubling of remote gaming duty from 21% to 41%.

Grainne Hurst, Betting and Gaming Council 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.

“Any new taxes now risks giving a leg-up to the lurking menace of the black market, which is hoovering up disaffected customers with eye catching offers but none of the protections that are in place in the regulated market.

“We want to partner with government to see the right, proportionate regulations, and a stable tax regime, which doesn’t hit customers, doesn’t raise the attraction of illegal operators and doesn’t derail the horseracing industry, but instead delivers on the government’s growth agenda.”

Under the previous Conservative government, Jeremy Hunt, the former chancellor, had claimed his government would consult on bringing in a uniform GGR tax rate for remote gambling.

As part of Hunt’s 2023 Autumn Statement, he said a single tax could be introduced across remote gaming duty, general betting duty and pool betting duty.

Tax hikes have been one of the major topics in Europe this year, after both Sweden and the Netherlands approved rises.

In Sweden, GGR tax increased from 18% to 22% in July, much to the disappointment of local operators.

The Netherlands is due to have one of the highest tax burdens on the continent by 2026 after the new right-wing coalition approved raising the rate to 37.8% in two tranches.

Image credit: UK Parliament/https://creativecommons.org/licenses/by/3.0/