UK tax hike could push two thirds of players into black market
Melanie Ellis, partner at Northridge Law, emphasizes that smaller operators may struggle to cope with potential tax increases due to already slim profit margins.
Recent findings from a YouGov survey reveal that two-thirds of bettors in Great Britain are inclined to shift their gambling activities to unlicensed operators if online betting tax rates are raised. This alarming trend raises critical concerns within the industry regarding player safety and market integrity.
According to the YouGov survey, a significant majority of respondents expressed apprehension about the repercussions of elevated tax rates. Approximately 65% of players indicated that increased costs would prompt them to patronize unregulated betting sites that evade taxation.
In April, the Treasury unveiled a tax consultation aimed at streamlining the current framework. It proposes replacing three existing online betting tax rates with a singular rate. This consultation commenced on May 6 and is slated to conclude on July 21.
The existing tax structure encompasses Remote Gaming Duty (RGD), General Betting Duty (GBD), and Pool Betting Duty (PBD). Under the current regime, Remote Gaming Duty is levied at 21% of operator profits, while General Betting Duty and Pool Betting Duty are assessed at 15% of profits and net stake receipts, respectively.
As the consolidation of these rates looms, uncertainty shrouds the exact rate the government will establish for the new Betting & Gaming Duty (BGD). The industry remains apprehensive that the new tax rate may mirror the elevated Remote Gaming Duty, posing further challenges to operators.
Can Operators Absorb the Impact of Increased Tax Rates?
Commenting on the situation, Melanie Ellis informed iGB that while some operators might manage minor tax hikes, many are already grappling with narrow profit margins.
“Smaller and emerging brands striving to gain market share will undeniably feel the impact,” she noted.
Ellis cautioned, “The Betting and Gaming Council (BGC) fears that bookmakers may have to present less favorable odds to maintain profitability. This tax increase could lead to market contraction, potentially leaving only the most resilient operators in service.”
This contraction poses a direct threat to customers, potentially steering them toward the black market. “Unfortunately, it is often the most vulnerable players who are disproportionately affected by such market shifts,” she added.
BGC’s Previous Warnings Against Increased Gambling Tax
The BGC has issued multiple warnings regarding the implications of proposed tax modifications, arguing that they could jeopardize vital segments of the industry, including horse racing.
“This shocking statistic underscores what is at stake should the government proceed with a self-sabotaging tax increase on ordinary punters,” stated BGC CEO Grainne Hurst in light of the YouGov survey results.
“It is evident that such tax hikes will not generate greater revenue. Instead, they risk marginalized players leaving the regulated market with its world-class standards on player safety and compliance to seek out the unregulated and unsafe black market.”
BGC: A ‘Wake-Up Call’ for Government
Hurst emphasized that any tax increase would undermine the government’s growth strategy. With Labour at the helm for nearly a year following a decisive victory in the 2024 general election, this issue requires immediate attention.
“This is a wake-up call for government,” Hurst asserted. “Players have been unequivocal: impose further taxes, and they will abandon reputable sports like racing in favor of the black market, catalyzing a downward spiral.”
In this vein, the BGC highlighted its recent research on the British black market, revealing that players currently wager up to £2.7 billion online with unlicensed operators.
“This burgeoning, illegal gambling environment does not contribute to sport, nor does it pay taxes. Instead, it targets vulnerable customers, including those who have self-excluded,” the BGC stated emphatically.
