The Betting and Gaming Council (BGC) has sounded the alarm over potential tax hikes, warning that such measures could lead to a significant loss of 40,000 jobs within the sector and spur an increase in illegal gambling activities. This stark warning was delivered during a Treasury Select Committee hearing, which focused on exploring revenue-raising measures as the November budget approaches. Grainne Hurst, the chief executive of the BGC, highlighted the looming threat posed by unlicensed gambling operators, noting that about 1.5 million British consumers are currently using black market sites. She argued that further tax increases would exacerbate the challenges licensed operators face in staying competitive.
In her testimony on Tuesday, October 28, Hurst stated that the black market already presents a substantial threat to the regulated gambling industry in the UK. “We know that the black market is already a really serious threat for the regulated sector in the UK,” she asserted, highlighting the dangers of pushing more consumers into unregulated spaces.
Currently, the industry grapples with an effective tax rate that exceeds 65%, according to the BGC. This figure incorporates a variety of levies, beyond standard gambling-specific duties, which policy groups often estimate at around 22%. Stephen Hodgson, who chairs the BGC’s tax committee, explained that this effective tax rate includes business rates, corporation tax, employer National Insurance contributions, and several gambling excise taxes. Hodgson pointed out that, in some instances, the total tax burden can exceed 80%.
He cited international experiences, notably in Ireland, to underscore the industry’s concerns about market displacement driven by tax increases. Hodgson mentioned that since the tax rise in 2019, over 120 betting shops have closed across Ireland, which he described as a significant number in the Irish context. He argued that Irish bookmakers still face challenges resulting from these tax changes, countering the claims that higher taxes would boost revenue without detrimental effects.
The committee also heard differing perspectives during the hearing. Some think tanks argued that the gambling industry is currently undertaxed, especially in light of the social harms associated with gambling. Carsten Jung, interim associate director at the Institute for Public Policy Research, proposed raising the remote gaming duty from 21% to 50% and the machine games duty from 20% to 50%, estimating that such increases could generate an additional £3.2 billion in revenue.
Dr. Theo Bertram, director of the Social Market Foundation, suggested a more differentiated approach by advocating for higher taxes on online slots and casino games while protecting traditional betting and horse racing activities. He downplayed industry fears about the expansion of black markets, referencing research from the Harm Reduction Journal that suggests higher taxes do not necessarily drive consumers to offshore markets. Bertram also mentioned that measures targeting payment processors could effectively combat illegal gambling sites and highlighted studies indicating that online slots pose higher harm levels than sports betting.
Stewart Kenny, co-founder of Paddy Power, reinforced this viewpoint, stressing that betting on horse racing or events like general elections is less harmful than engaging with fixed-odds betting terminals or online slots. He also pointed to Ireland’s experience after they doubled the betting tax in 2019, noting that tax revenue increased from £52 million to £95 million without a significant rise in black market activities.
However, the BGC strongly disagreed with the think tanks’ stance, particularly the assertion that the gambling sector is undertaxed. Hodgson highlighted the contraction in the retail sector following previous tax hikes, suggesting that the reality is more complicated than portrayed.
Hurst further emphasized the industry’s substantial investments in player protection measures since the release of the gambling white paper, which she noted have added £1 billion in costs that the industry is currently absorbing. Defending the sector’s position, she informed the MPs that 72% of customers engage in gambling purely for entertainment, with only 0.4% of the population experiencing problem gambling. “The industry has a range of measures in place to monitor what customers are doing and therefore interact with them, where we see that they might be facing any harm,” Hurst stated. She insisted that the industry plays a crucial role in mitigating any potential harm caused by gambling.
The evidence gathered from this hearing is expected to play a critical role as the committee evaluates taxation options ahead of the chancellor’s budget, which is scheduled for release on November 26. The debate over the appropriate level of taxation and regulation in the gambling industry continues to be a contentious issue, with significant implications for the sector’s economic contribution and social responsibilities.
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