The Institute for Public Policy Research (IPPR) has once again called for the UK government to increase gambling tax, but this time it said the policy change could help fight child poverty.
The UK think tank has suggested a significant uptick across the current remote gambling tax rates and gaming machines duty could raise over £3 billion ($4 billion) per year.
It recommended increasing remote gaming duty from 21% to 50%, and machine games duty from 20% to 50% of operator profit. This would go along with increasing general betting duty from 15% to 25%, “bringing other sports in line with … horse racing”, it said. Under this increase, the IPPR said the government could generate an additional £1.8 billion in 2026-27.
The proposed machine games levy increase could raise £880m, while the general betting duty rise could generate £450 million.
Such increases could be used to scrap the controversial two-child limit and benefit cap, which was introduced in 2017, the think tank added.
It believes these changes could increase fairness and reduce the complexity in gambling tax infrastructure.
“The industry benefits from unique tax advantages, including a complete exemption from VAT [sales tax] – unlike almost any other consumer-facing sector,” it added. “These reforms would ensure the industry contributes more fairly, reflecting both its profits and the social costs it creates.”
The think tank, which has a track record of influencing political debate, said its proposals targeted the “profitable parts of the gambling industry … where harms are concentrated and revenues have soared”.
According to the report, “over 60% of gambling profits come from just 5% of users, many of whom are at high risk of serious harm”.
Operators pay ‘little or no corporation tax’, says IPPR
IPPR stated that online operators pay “little or no corporation tax”, adding that “in 2021, two of the largest operators paid effective tax rates of just 3% and 4%”.
Justifying the proposal, Henry Parkes, principal economist and head of quantitative research at IPPR, said the gambling industry is highly profitable but is exempt from paying VAT and often pays no corporation tax, with many online firms based offshore.
“It is also inescapable that gambling causes serious harm, especially in its most high-stakes forms. Set against a context of stark and rising levels of child poverty, it only feels fair to ask this industry to contribute a little more.”
Black market ‘unlikely to be a major threat’
The gaming sector is already being threatened by a potential increase to UK gambling taxes as the government undergoes a consultation to consolidate the current three remote gambling tax rates into one.
The industry has warned this could be detrimental for the UK gambling sector and destroy the horse racing industry.
A YouGov survey in June reported that up to two-thirds of players could transition to the black market if costs from gambling tax increases were passed onto the consumer.
Controversially, the IPPR has said the black market is “unlikely to be a major threat” to its proposed reform to more than double gambling taxes.
However, the IPPR suggested such fears are overblown.
“Not only is there little robust evidence to suggest that stronger regulation would drive large numbers of people to the illegal market, there is even less to suggest that altering the rate of taxation will do so,” the IPPR release said.
The sector has acknowledged the black market is a significant threat to it, particularly in the face of tightening regulations, which is pushing players to frictionless options offshore.
Notably, a 2024 survey commissioned by the Betting and Gaming Council (BGC) estimated that up to £2.7bn is staked online with black market operators each year in the UK. The survey also found that more than one in seven gamblers recognise at least one unlicensed gambling brand.
‘Economically reckless’ says BGC
Responding to the IPPR’s proposal on Thursday the BGC said: “We completely reject the proposals by the IPPR … which will only hit ordinary punters.
“These proposals are economically reckless, factually misleading and risk driving huge numbers to the growing, unsafe, unregulated gambling black market, which doesn’t protect consumers and contributes zero tax.”
There’s been a lot of talk in the media this morning about tax.
We are unequivocal that further taxes will hurt punters and businesses.
See our full statement below.pic.twitter.com/aLaarLNy53
— Betting and Gaming Council (@BetGameCouncil) August 7, 2025
The BGC stated that its members contribute £6.8bn to the economy, generate £4bn in tax and support 109,000 jobs.
“Further tax rises … would do more harm than good — for punters, jobs, growth and public finances.”
The BGC also said it was “incorrect to suggest horseracing is taxed at a higher rate” and added it was misleading to conflate the sport’s separate levy with tax.
What can the UK learn from gambling tax hikes in Europe?
Similar changes made in neighbouring markets have indicated tax increases can have a negative impact on the sector and cause players to move to illegal offerings.
In the Netherlands, remote gambling tax was increased in January to 34.2%. Michel Groothuizen, chairman of the KSA, this week said the change had weakened player protection efforts by making it financially more difficult for providers. This has led to a decrease in GGR for the entire market.
Similarly, stakeholders in Germany have long bemoaned strict measures like online slots stakes and higher taxes, which have impacted channelisation over time.
Gordon Brown backing
The IPPR’s proposals have been backed by former UK Prime Minister Gordon Brown.
“Thanks to IPPR’s report, we now know that taxing gambling more fairly would fully fund the first crucial step in the war we must wage against child poverty: ending the two-child limit and lifting the benefit cap,” he said.
“There are many reasons why the highly profitable betting and gaming industry should pay a fairer share towards the cost of UK’s un-met needs. Most important is that it would enable half a million children to be lifted out of poverty in this autumn’s budget, and so help to build our country for the next generation.”
Autumn tax rises
The timing of the report is particularly pertinent.
A separate think tank, the National Institute of Economic and Social Research, warned this week that taxes in the UK must rise in the autumn budget if the government is to meet its self-imposed borrowing goals.
As things stand, the report said, the ruling Labour Party is set to miss its target by £41.2 billion.
Despite the industry’s warnings, the IPPR has said the black market would not be a threat if UK gambling tax was doubled.