The Proposal to Double Gambling Tax: A Solution to Child Poverty?
A notable coalition of over 100 MPs from the Labour Party has reached out to the current UK Chancellor, advocating for a significant increase in the gambling tax rate as a means to combat child poverty.
This initiative, backed by nearly half of Labour’s backbench MPs, underscores the urgent need for a “targeted levy on harmful online gambling products.” Spearheaded by MPs Alex Ballinger and Beccy Cooper of the All Party Parliamentary Group for Gambling Reform, the letter calls for revamping the gambling tax system, suggesting that proceeds could help eliminate the two-child benefit cap that currently limits financial support for families.
Ballinger and Cooper are echoing a recent appeal from former Prime Minister Gordon Brown, urging Chancellor Rachel Reeves to consider recommendations from the Institute for Public Policy Research (IPPR).
IPPR’s Proposed Changes to Gambling Tax
The IPPR’s recommendation includes raising the Remote Gambling Duty from 21% to a striking 50% of gross gambling yield. Additionally, the proposal suggests increasing the Machine Games Duty on cash-prize slot machines from 20% to 50%. Furthermore, the General Betting Duty on sports betting—both online and in brick-and-mortar establishments, excluding horse racing—would see an increase from 15% to 30%.
If implemented, these changes could generate an estimated £3.2 billion ($4.3 billion) by the fiscal year 2026-27, potentially alleviating child poverty for around 500,000 children by allowing families to receive benefits regardless of the number of children.
“No child should be left in poverty while gambling firms record monumental profits,” Ballinger proclaimed. “The societal costs of gambling-related issues are overwhelmingly high, with public services absorbing over £1 billion annually.”
Industry Concerns: Is a Tax Hike Counterproductive?
However, the Betting and Gaming Council (BGC), representing the gambling sector, expresses strong opposition to such tax hikes. They warn that imposing higher taxes on legitimate operators may inadvertently bolster the black market. A spokesperson emphasized, “Raising taxes on the regulated industry could jeopardize jobs, diminish investments, and undermine sports funding, all while failing to generate additional revenue.”
Critics argue that increased taxation could push consumers toward unregulated markets that lack safeguards, thus posing a greater risk to public welfare.
International Lessons: The Dutch Experience
Proponents of the gambling industry often cite recent international examples to bolster their case. In the Netherlands, a recent tax hike resulted in a surprising revenue decline. Following an increase from 30.5% to 34.2% in January, the regulatory agency Kansspelautoriteit (KSA) indicated that the Dutch government might experience a €40 million drop in iGaming revenues, contrary to expectations for growth.
Similarly, Dutch State Secretary for Taxation Eugène Heijnen announced earlier this month that no new policy would be introduced to offset the anticipated shortfall from online gambling revenues resulting from these tax increases.
The Licensed Dutch Online Gambling Providers trade body has pointed to various restrictive measures, including bans on broad advertising and new deposit limits, as contributing factors to this revenue decline. They are urging the government to reconsider and revise the current tax framework to mitigate these impacts.
Conclusion
The call for an increased gambling tax rate poses both an opportunity and a challenge. While the proposed financial model aims to address pressing societal issues like child poverty, it raises complex questions about the potential consequences for the regulated gambling industry and the broader economic landscape. The dialogue surrounding this initiative will need to balance fiscal responsibility with the well-being of vulnerable populations.