The UK Parliament’s Treasury Committee has encouraged the government to “sharpen the differentiation” between land-based gambling and the more “addictive” online gambling verticals, and tax “higher-risk” verticals more than others.
The committee made these recommendations in its report on the taxation of gambling in the UK on 7 November. These follow an inquiry into proposed increases in gambling tax held in October, and will inform the government on what route to take on gambling taxation, ahead of the 26 November autumn budget.
First the committee said the government must take account of the different harms caused by different types of gambling. It said the Treasury must ensure Remote Gaming Duty and Machine Gaming Duty are always set at a higher rate than Gaming Duty.
“Different forms of gambling cause varying level of harm to individuals, families and society,” the report said. “We are not convinced that current Treasury policy on the taxation of gambling captures the varying extent of those harms.
“We are urging the government not to cave in to industry scaremongering and to tax online betting games at a rate that reflects the level of harm they inflict.”
Risks differ across gambling verticals
The report insisted current Treasury policy on gambling taxation did not “capture the varying extent of [the] harms” caused by online casinos.
“The government should sharpen the differentiation between physically present gambling related to horse racing or arcades, versus the online games that promote harmful, addictive, high frequency betting that bring no engagement with or benefit to life in our communities,” the report stated.
Co-founder of Paddy Power and former industry executive, Stewart Kenny, was among those who contributed to the inquiry, calling for tax rates to be based on the level of harm associated with each vertical.
“If there is only one message that I get through to you, it is that betting on horse racing or betting on the next general election is less harmful than betting on fixed-odds betting terminals or online slots, mainly,” he said during the October panel.
“There are two ways of seeing whether a product is highly addictive: how quick is it between investment and result, and how quickly can you repeat the dose.”
Questions over black market impact
As for the black market, the committee’s report urged the government to look at new ways to address the issue. It called on the Treasury to review whether additional anti-avoidance measures were needed to stop players migrating.
“For too many people, the highly addictive and harmful nature of online betting games has seriously impacted their lives and the lives of those around them,” said Dame Meg Hillier, chair of the committee.
The report also considered the sector’s argument that raising UK gambling tax could lead to a rise in black market gambling where offers and odds won’t be impacted by the higher tax rates.
Within the report the committee considered the Betting & Gaming Council’s recent report, which warned that a tax hike could see up to £3.1 billion lost from the economy. However it said as the EY-produced filing was funded by the gambling industry it could be considered biased.
It also noted a separate ‘Harm Reduction Journal’ paper which concluded that taxation of gambling was “unlikely to significantly direct consumption and drive consumption to offshore markets”.
Kenny had also dismissed black market threats in his inquiry panel session. “When I campaigned for the gambling industry, I always used to talk about black markets and job losses,” he said. “We saw it again when the FOBT legislation was brought in: ‘Oh, this will close all the shops,’ but it didn’t. It is a bit of scaremongering.”
What has been said so far on the potential UK gambling tax hike?
The gambling tax discussion commenced in April when the Treasury launched a consultation considering a proposal for a single rate for all remote gambling. This would replace the current, three-banded tax rate system.
Then in August, the IPPR advised the government to increase remote gaming duty from 21% to 50% and machine games duty from 20% to 50% of operator profit, with both measures expected to raise an additional £3 billion ($4 billion) in tax revenue per year.
Since then, over 100 Labour MPs have backed potential gambling tax reforms and suggestions to increase the rate to 50%. Chancellor Rachel Reeves has also said previously that the industry must pay its “fair share” of tax.
“I do think there’s a case for gambling firms paying more,” Reeves told ITV in September. “On a personal level, I’ve never bet in my life. They make an important contribution to the economy, but they should pay their fair share of taxes. We’ll make sure that happens.”
The Treasury Committee’s report on UK gambling tax has downplayed the black market threat if gambling taxes were to rise.