Regulus Partners has said the UK gambling market is close to the “tipping point of the Laffer Curve” and that tax increases could reduce the tax yields.
The boutique analyst firm released a blog today, 26 September, after more than 100 Labour MPs signed a letter lobbying Chancellor Rachel Reeves to hike online casino and sports betting taxes.
The letter made reference to the Institute for Public Policy Research’s proposals of increasing general betting duty from 15% to 30% and upping remote gaming duty from 21% to 50%.
However, the MPs said there should be a carve-out for horseracing, with the other tax increases able to deliver £2.9bn to fund the revocation of the two-child benefit cap in the UK.
Regulus Partners suggested the true figure would be £2.1bn, given the tax rate increases refer to online-only gambling.
The analyst firm said that to arrive closer to £3bn, taxes would need to be increased on land-based casinos and betting shops – which, according to the group, could lead to around 80% of shops shuttering.
Essentially, machine games duty would need to be upped to 50% to reach the tax revenue suggested in the letter, the group argued.
The analyst’s post read: “Horseracing cannot be protected by policies which practically eliminate the LBO sector which still generates c. 40% of racing’s betting-related revenue and drives online customers to untaxed, unlevied, unprotected and content-pirating black markets.
“Horseracing might be protected from direct tax increases, but the indirect consequences would be broadly similar – death as a consequence rather than as a cause.”
Additionally, the letter drew comparisons with other jurisdictions to point towards the UK’s “relatively light” tax burden on the gambling sector.
Reference was made to the Netherlands, which taxes GGR at 34.2% and is due to rise to 37.8% next January (although the letter incorrectly stated the rate was 29%).
Regulus Partners noted that the Netherlands Gambling Authority has admitted tax revenue is down, despite the increase.
Similarly, during evoke’s H1 analyst call, CFO Sean Wilkins pointed to the Netherlands as a case study for the government on how to avoid a decline in tax revenue and increased leakage to the black market.
LiveScore Group CEO Sam Sadi told EGR that tax changes, among other regulatory shifts, had “completely altered the market conditions and viability” of the Netherlands.
LiveScore Bet has since exited the market, along with Flutter-owned tombola.
Regulus Partners continued: “The Chancellor needs to find tax increases quickly from somewhere because she has already been prevented from cutting costs largely by the same people who signed this letter and the deficit is stubbornly increasing, leading to equally stubborn inflation.
“However, beyond some logical but marginal tweaks (eg, increasing online taxes by a marginal amount because there is room to do so, removing the tax on bonuses to avoid distortions, reclassifying virtual as gaming, protecting racing), the economics of the UK gambling sector and properly understood international examples show that the UK gambling industry is already close to the tipping point of the Laffer Curve, meaning major tax increases would simply reduce tax yields, put customers at risk and cause self-defeating job losses – putting further pressure on benefits.”
After the letter was published, the Chancellor told ITV she “didn’t need MPs […] to tell me to launch an enquiry into gambling taxation”.
Reeves is due to deliver the Autumn Budget in November.
The post UK gambling market close to the “tipping point of the Laffer Curve”, say analysts first appeared on EGR Intel.
Regulus Partners suggests international comparisons show the UK would not sustain a major tax hike, following 100 Labour MPs throwing their support behind the policy implementation
The post UK gambling market close to the “tipping point of the Laffer Curve”, say analysts first appeared on EGR Intel.