UK Gambling Industry Faces £3 Billion Hit Due to New Higher Tax Plans

Online operators are subject to a 21% fee for remote gambling duty, which would increase to 50% under the IPPR proposal.

Shares of British gambling companies went down sharply, lowering the stock market value of significant operators by over £3 billion, following a report that Treasury officials may be able to extract between £900 million and £3 billion in additional taxes from the gambling industry.

As the chancellor, Rachel Reeves, is trying to fill a significant deficit of £22 billion in finances, she is facing pressure from two powerful think tanks to increase taxes on the business.

Treasury officials are reportedly ready to increase the duty paid by an industry that receives £11 billion in annual revenue from British gamblers. Treasury officials working on Labor’s first budget in 14 years will publish it on October 30.

There are two different proposals: one by the Social Market Foundation (SMF), which wants to raise tax on online gaming by £900 million, while the Institute for Public Policy Research (IPPR), which demands to reduce various levies on the industry by around £3 billion.

Although analysts predicted that the government would not opt for the higher range of duties, they cautioned that the industry would face more regulations and taxes.

On Friday, shares of Flutter, which owns brands like SkyBet and Paddy Power, dropped about 9% in New York, following a report suggesting that the budget may include an increase in taxes.

When the FTSE opened on Monday, other companies in the publicly traded gambling industry also saw a significant decline.

Owner of Ladbrokes Entain saw a 14% drop in early trade, equivalent to a £700 million drop in the stock value. While the decline of Flutter was more at 7.5%, the stock price was negatively impacted by £2.5 billion due to its substantially bigger market capitalization of £30 billion compared to £4.2 billion of Entain.

Other companies whose stock value has dropped include Playtech, a company that makes gaming software, and Evoke, the owner of William Hill, which fell by 12% and nearly 2%, respectively. Rank, which owns Mecca Bingo and other online gambling businesses, saw a 7% decline.

The decline in shares of gambling companies listed on the FTSE was more than £3 billion. Bet365, one of the biggest gambling companies in the UK, was not listed.

Treasury authorities are considering a tax plan that originates from the left-leaning Institute for Public Policy Research. According to the think tank analysis, raising taxes on higher-harm items like online casino games could bring in £2.9 billion for the government next year and up to £3.4 billion by 2030. Last year, the taxes generated £3.3 billion, or roughly £2.2 billion, excluding lottery duty.

The Treasury would not impose duties on activities that do less harm, including bingo and the lottery, under the IPPR plans. They argue that the chancellor should double taxes, like the general betting duty of 15% imposed on the profits of high-street bookmakers.

Online operators are subject to a 21% fee for remote gambling duty, which would increase to 50% under the IPPR proposal.

A different think tank, SMF, is working on another proposal, which will be released on Tuesday. It would double the tax on online gambling companies from 21% to 42, raising approximately £900 million.

The SMF, backed by Derek Webb, has contributed £1.3 million to Labour since the beginning of 2023 and is one of the top five individual donors.

Webb, who made money by creating casino games, is a significant supporter of changing laws about gaming, including the tax regime.

Broker Jefferies states that the government is unlikely to choose a sharp tax rise on the industry since it would wipe off the profits of listed operators and put many smaller operators in an existential crisis.