If a new tax plan the UK Treasury has in the works for the gambling industry moves forward, it would be yet another blow to horse racing. The Betting and Gaming Council (BGC) issued a warning about the plan yesterday, calling it nothing more than a “Trojan Horse.”
At the heart of the issue is the possibility of a tax increase on all remote betting. The UK government hinted at the change last week when it released its Autumn Statement, one of two mini-budgets the Treasury prepares annually.
In it, the Treasury suggests that a single tax on remote betting may be necessary. Currently, the sports betting tax is 15% of profits, while the remote gaming tax is 21%. The wording in the Autumn Statement is sounding an alarm.
Government Trickery
The remote gaming tax covers casino gambling offered over the Internet, telephone, TV and radio. However, the BGC feels the government will use its power to raise the remote betting tax to the same level.
There are genuine fears that any so-called simplification of the current tax structure will be nothing more than a Trojan Horse to further raise taxes on businesses,” said BGC CEO Michael Dugher.
This could be particularly devastating to the horse racing segment, which is experiencing declines in participation and revenue. From 2007 to 2018, the percentage of the UK population that participated in bets on the Royal Ascot, the Grand National and others fell from 17% to 10%.
The introduction of affordability checks and new mandatory responsible gambling taxes are putting a lot of pressure on operators and players. Another 6% tax increase could seriously cripple horse racing, which relies almost completely on taxes for its survival.
Straining the matter more is the lack of collaboration between the Treasury and the gaming industry. There was no discussion prior to the Autumn Statement, nor was there any input from the Department for Culture, Media and Sport (DCMS), which oversees the gaming ecosystem.
Earlier this year, Paul Scully, then the head of the DCMS, promised that the government would discuss any betting tax changes with the industry. This, he said, would guarantee that the “benefits of the horserace betting levy are maximised” for the horse racing segment. Scully was replaced a month later by Lucy Frazer.
Reaching the Breaking Point
The BGC asserted in its statement that 10,000 people in the gambling and betting ecosystem have been put out of work since 2019. This has been partly the result of COVID-19. It’s also because of the UK government and the Gambling Commission, both of which have sought to handicap the industry.
The regulated ecosystem is currently responsible for contributing around £4.2 billion (US$5.3 billion) in tax revenue to the government. Should the tax increase plan survive, it will mean less tax revenue, not more. This would be the result of an increase in black market gambling, which is already on the rise in the UK.
The cost of livestreaming horse races is skyrocketing, as well, and operators have to spend more money to maintain workable margins. Over the next two years, they could pay over 16% more, or roughly £30 million (US$37.84 million), just on streaming rights.
The BGC added that, according to a study that PWC conducted, there has already been a significant jump in the use of unregulated online gaming sites. In just the past couple of years, the number has increased from 210,000 to 460,000. A larger exodus is expected once the UK government implements all the restrictions it has planned.
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