Concerns raised over potential UK remote gaming tax rate reform

Concerns have been raised by the industry that the UK gambling tax rate reform could lead to higher taxes for the sector.

HM Revenue & Customs and the treasury proposed Monday to consolidate the current three-rate system for remote gambling to a single remote gambling tax, called the Remote Betting & Gaming Duty (RBGD).

As part of the reform, the departments called for input from industry stakeholders. The consultation process will run for 12 weeks and close on 21 July.

The government is expected to set out its final plans during the autumn budget. In its consultation, it said the tax shake-up would simplify the tax system and reduce administrative costs for operators.

Current system has three UK gambling tax rates in place

Currently, the UK has three tax rates in place: Remote Gaming Duty (RGD), which is set at 21% of operator profit; General Betting Duty (GBD), which is set at 15% of profit; and Pool Betting Duty (PBD), at 15% of net stake receipts.

But, industry folk are concerned the remote gambling tax rate for betting will be increased by 6% to be in line with the current remote gambling duty.

Responding to the consultation launch, Betting and Gaming Council (BGC) CEO Grainne Hurst said if the reform led to higher taxes overall, it would be a “self-defeating” move by the government – one which “makes a mockery” of its growth strategy.

“Any potential further increase in taxes on our members, so soon after a white Ppaper which cost the sector over a billion pounds in lost revenue, will not raise more money for the treasury,” BGC’s Hurst said in a statement to iGB.

Hurst also said raising GBD to the same level as RGD could be “catastrophic” for the racing industry’s finances.

A spokesperson for the British Horseracing Authority told iGB they welcomed the opportunity to be involved in the consultation process. However, there is concern that the tax harmonisation would have “unintended consequences” for the sector’s finances.

Could UK betting sector be hit with higher gambling tax rate?

Additionally, some have expressed concerns the government may be about to favour on-premises gambling sites. The proposal documentation does highlight retail and on-premises casinos having higher costs than online operators. These include building maintenance, larger staff and utility costs.

Gambling consultant Steve Donoughue told iGB the black market will ultimately determine future tax rates. He believes more and more gamblers will leave the increasingly restricted legal market for competitive deals offshore.

Last month, gambling charity Deal Me Out reported UK gamblers were being driven to the black market by increasing friction on licensed products.

Additionally, Donoughue expressed concerns the UK gambling tax reform could lead to a cash grab by the treasury.

“Anyone who believes this will be seen as an opportunity by the cash-strapped treasury to revert all taxes back to the original idea of having practically all gambling taxes at 15%, is living in cloud cuckoo land,” Donoughue said.

“A decade ago the treasury said they believed you could tax online gambling as high as 29% without creating a black market, so the new rate could be up as high as that.”

Treasury has overstated gambling growth in UK, says Regulus

In a consultation document, the treasury estimated gambling in the UK had a gross gambling yield of £15.6 billion annually (as of 2014). Approximately £3.4 billion of that is taken by the exchequer in excise duties each year.

But Dan Waugh, partner at Regulus Partners, told iGB the government had potentially miscalculated the GGY growth of remote gambling in recent years. According to its estimate, the sector has had “exponential” growth of 208% between 2014 and 2024.

“The problem with this calculation is that it ignores the fact that remote gambling licensing, and therefore taxation, was based on Point of Supply until November 2014,” Waugh said.

“As a result, seven months of the 2014-15 year were under PoS and not Point of Consumption, which means that a large number of operators were not reporting GGY to the Gambling Commission. The 208% growth statistic is therefore based on a false comparison.”

He noted that if you look at the commission’s statistics for 2015 to 2024, online sports betting growth was a more realistic 36%.

Entain CEO: UK gambling tax rate change is a few years off

During Entain’s Q1 earnings call Tuesday, CEO Stella David took a more pragmatic approach to the news. She told analysts the reform was still incredibly nascent and, considering the legal process needed to adopt a new system, the sector would likely not see any changes come into force until 2028.

“It’ll be a long journey. There’s a consultation and legislation would have to change, so the earliest we perceive there would be some change is late 2027, early 2028. There’s a lot that can happen between now and then. It’s really early days and nothing will happen in the short term,” David said.

 Gambling stakeholders remain skeptical of the UK government’s plans to restructure remote gambling tax.