YES: Dr James Noyes, senior fellow, Social Market Foundation
Nobody likes to pay more tax than needed. But while the rest of us have little choice in the matter, the UK gambling industry managed to turn tax breaks into a fine art in recent years.
There are several reasons why gambling is undertaxed here.
First, it is exempt from VAT. The result? The cost of gambling is kept artificially low, creating economic distortions between the gambling industry and providers of other goods and services. Many other countries apply an equivalent of VAT on operator yield. Britain does not.
Second, British online gambling tax rates tend to be lower than other markets. Pennsylvania has a remote slots tax rate of 55%. New York has a remote sports betting tax rate of 51%. In Europe, the Netherlands and Austria have rates of about 40%.
Yet in Britain, remote gaming duty on online casino is 21% and general betting duty is even lower at 15%.
Third, gambling can lead to harm, which in turn can create fiscal costs for society. Research has shown that a small proportion of high-risk gamblers account for a disproportionate share of industry revenue. These ‘vital few’ are particularly dependent on online casino content such as slots.
While the fiscal costs of this harm are difficult to quantify, the Office for Health Improvement and Disparities estimates they exceed £1bn – countering any benefit of industry tax revenue.
Finally, many operators base parts of their activity offshore, meaning they don’t pay UK corporation tax, UK wages or contribute to national income. Yet they all benefit from either having a British licence, advertising through British sports or drawing revenue from British customers.
A review of UK gambling taxation is long overdue, although the government has pledged to consult on reviewing online taxes next year. That consultation must mark the moment when the government stops subsidising the online gambling industry through low taxes and starts bringing Britain’s outdated gambling tax structures in line with the digital age.
NO: Melanie Ellis, partner, Northridge Law
Given rumours in the run-up to the Budget, remote gambling duty (RGD) remaining unchanged will have felt like a relief. But a doubling of it, or even a large increase, was never really on the table.
RGD contributes about £1bn in taxes each year (of the approximate £4bn from the gambling industry) and it would not have taken a genius in government to realise that a doubling of the duty rate would not have equalled a doubling of those receipts, or anywhere close.
With a £70bn per year increase in public spending to fund, RGD was never going to make a substantial contribution.
Arguably, the primary purpose of gambling duty is not to fund public services but to change behaviour. In the absence of solid evidence of any increase in problem gambling, and in the wake of significant ongoing regulatory reforms designed to protect the public from harms associated with gambling, there was little rationale for a tax rise.
On the other hand, a significant rise in taxes would give licensed operators little option but to alter RTPs, bonuses or perhaps marketing budgets. These measures would be necessary to remain profitable, but a blow to their ability to attract customers.
In some markets all providers are affected equally by a tax increase (customers having no choice but to accept higher prices or less appealing offers), but online businesses will always face competition from those not subject to UK taxation.
Reducing the ability of licensed operators to attract and retain British customers would inevitably increase the use of black market operators.
A consultation on harmonising taxes for remote gambling is promised next year, and the industry also faces the implementation of white paper proposals for restrictions on bonuses, stakes and marketing.
While the decision to leave RGD unchanged may have provided temporary relief, the ongoing regulatory scrutiny and potential future tax changes suggest the challenges are far from over.
The post Big Debate: Did the industry get off lightly with the UK government leaving duties unchanged? first appeared on EGR Intel.