The UK’s Betting and Gaming Council (BGC) has sounded an alarm over government plans to raise gambling taxes, which could potentially strip £3.1 billion from the UK economy and result in up to 40,000 job losses in the sector. This cautionary stance is based on a report commissioned by the BGC and conducted by consultancy EY-Parthenon, which analyzed several proposals for amending the existing gambling tax framework.
As the government prepares to unveil its new gambling tax plans during the upcoming budget on 26 November, multiple approaches have been considered but a definitive course has yet to be announced. The report in question evaluates four different proposals, focusing on the three primary gambling tax rates currently in effect. These include the general betting duty (GBD) at 15% of net stake receipts, remote gambling duty (RGD) at 21% of profit, and machines gaming duty (MGD) at 20% of profit.
A critical component of the report’s analysis is the concept of ‘elasticity’, which measures how sensitive an economic variable is to changes in another variable. The study utilizes estimates of ‘central’ price elasticity of demand from 2014 data by Frontier Economics for HMRC, alongside ‘higher’ elasticity figures estimated by EY to project more significant impacts.
Aligning Rates Could Adversely Affect Jobs
In one scenario, the report considered the impact of aligning tax rates, which would involve raising the betting duty to 21% while keeping the remote duty and machine duty at their current levels. Under central elasticity estimates, this alignment could generate an additional £250 million in betting duty but simultaneously result in a £400 million increase in black market activities. This shift could lead the government to miss out on £10 million in duties and potentially cost 800 direct jobs and 2,000 indirect jobs.
If elasticity is higher than anticipated, the black market could see an even larger swell, with black market stakes increasing by £1.2 billion. This scenario could lead to a £420 million reduction in gross value added (GVA) for the industry, with an estimated loss of 4,700 jobs.
SMF Proposal Could Boost Black Market Activity
Another proposal examined was from the Social Market Foundation (SMF), which suggested substantial changes: raising RGD to 50%, increasing GBD to 25% while cutting horse racing bets to 5%, and maintaining the MGD at 20%. Under a central elasticity scenario, the industry could see an extra £1 billion in taxes. However, black market stakes might soar by £5.8 billion, reducing regulated industry GVA by £2.2 billion and leading to a loss of about 22,000 jobs.
In a higher elasticity situation, while tax revenue could rise by £470 million, illegal market stakes might climb by £8.1 billion, further dropping GVA by £2.5 billion and resulting in over 30,000 job losses.
IPPR Proposal Poses a Major Risk to Employment
The IPPR’s proposal, which calls for raising all three tax rates significantly, could have far-reaching consequences. With central elasticity figures, this could mean a £1.8 billion tax increase, but black market activities might expand by £6 billion, causing a £2.5 billion reduction in GVA and the loss of 29,100 jobs.
If consumer response were even more pronounced, tax revenues might increase by £1.1 billion, but black market stakes could rise by £8.4 billion. This could potentially result in £290 million in lost duty, a £3.1 billion drop in GVA, and about 40,000 job losses, including 14,100 direct jobs and 26,000 indirect positions.
Fixed Increases Could Still Impact Employment
The report also explored the impact of a fixed 5% increase across all tax rates. Under central elasticity assumptions, this could boost excise revenue but diminish other tax revenues, reducing GVA and eliminating hundreds of jobs. The remote gambling duty could suffer the most, with an estimated £359 million loss in GVA and approximately 3,700 jobs.
Under a high elasticity projection, excise tax revenue would still rise, but the overall tax intake might fall by £210 million, with an £860 million decrease in GVA and up to 10,000 job losses. The remote gambling duty would again bear the brunt, losing £420 million in GVA and nearly 5,000 jobs.
Industry Leaders Voice Concerns Over Tax Increases
Speaking on the report, the BGC CEO emphasized the severe threat that increased taxes pose to UK jobs and economic growth. Any additional taxes would come on top of a statutory levy introduced on 6 April this year. The figures, she argued, are undeniable: a significant economic hit, jobs lost, and money siphoned to the black market in the event of a tax hike.
The executive further stressed the need for balanced regulations and a stable tax regime to support a thriving and regulated sector. These proposed changes, she warned, could inadvertently drive consumers to the unregulated black market, which lacks safeguards, tax contributions, and support for sports.
Betting Giants Warn of Potential Shop Closures
The release of the report has coincided with warnings from major operators about potential retail closures if the proposed tax hikes are enacted. According to a Sunday Times report, William Hill could shut down between 120 to 200 shops—up to 15% of its UK locations—should these tax increases proceed.
Similarly, Flutter Entertainment has announced plans to close 57 Paddy Power betting shops across the UK and Ireland, citing rising operational costs with nearly 250 staff facing redundancies. Entain’s CEO has also indicated that UK retail shops might close to mitigate expenses, reflecting the industry’s broader concerns over the proposed tax changes.
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