Concerns Over Tax Hikes in Online Betting: The Risks to Smaller Operators
Melanie Ellis, a partner at Northridge Law, has voiced serious concerns regarding the potential impact of a tax increase on the online betting industry, particularly for smaller operators who are already struggling with tight profit margins.
A recent YouGov survey highlighted that two-thirds of bettors in Great Britain expressed that raising online betting tax rates might compel them to seek out unlicensed operators. This statistic raises alarm about the implications of taxing the sector more heavily. About 65% of respondents acknowledged that increased rates could drive them to engage with unregulated sites that avoid tax obligations, should operators pass these costs onto consumers.
In April, the Treasury initiated a tax consultation to consolidate the existing three online betting tax rates into a single rate. The consultation, which began on May 6 and will close on July 21, aims to review the Remote Gaming Duty (RGD), General Betting Duty (GBD), and Pool Betting Duty (PBD). Currently, the RGD tax rate stands at 21% of operator profit, while both GBD and PBD are taxed at 15%.
The future of these tax rates remains uncertain, but the betting sector is apprehensive that the recently proposed Betting & Gaming Duty (BGD) may align tax increases with the RGD, exacerbating financial strains.
Are Smaller Operators Equipped to Handle Higher Taxes?
Melanie Ellis emphasized that while some larger operators might withstand a slight tax increase, many smaller and emerging brands could struggle significantly. "These operators, especially those aiming to carve out a market presence, will feel the impact most profoundly," she remarked.
The Betting and Gaming Council (BGC) has raised alarms that, as bookmakers face pressure to maintain profit margins, the quality of odds provided could suffer. This tax increase might not only squeeze profitability but could also stifle market diversity—leaving only those companies equipped to handle the new tax landscape.
Such outcomes could inadvertently push consumers toward the illicit gambling market, particularly affecting those most vulnerable to gambling-related harms.
Warnings from the BGC Regarding Tax Changes
The BGC has not shied away from articulating its concerns about the possible repercussions of the proposed tax adjustments, suggesting that such changes could have detrimental effects on niche markets like horse racing. BGC CEO Grainne Hurst highlighted the significance of the YouGov findings, stating, "This data underscores the high stakes involved if the government proceeds with a tax hike that ultimately benefits no one."
She further warned that a tax increase would likely backfire, driving customers from the regulated environment—the one known for its strict player safety standards—into the shadows of the unregulated market, where oversight is minimal and dangers abound.
A Call to Action for Policymakers
Hurst has characterized the survey results as a crucial wake-up call for policymakers. Following the recent electoral victory of Labour, which now holds power, she suggested that any further tax burden on punters could undermine the government’s growth strategy. “This is a moment for reflection,” she asserted. “If taxes rise, we risk the viability of sports betting, leading punters directly to the illegal market and triggering significant declines across the board.”
Moreover, the BGC recently noted a troubling statistic: British players are currently estimated to wager around £2.7 billion through unregulated outlets. As the BGC pointed out, this illegal market not only fails to contribute to the welfare of sports but also targets the most susceptible individuals, including those who have attempted to self-exclude from gambling activities.
In summary, the proposed tax increases in the online betting sector present a complex challenge. While aiming to increase state revenues, there’s a clear risk of driving bettors to unregulated sites, thereby undermining the integrity and sustainability of the entire gambling industry.