The UK horseracing industry could suffer significant damage if the Labour government’s implement their proposed £3 billion tax increase on the gambling industry.
Gambling companies have experienced a significant decline in share prices in the past few weeks because of increasing concerns about tax hikes. In a recent report by The Guardian, they state the Labour government is discussing the idea of levying a £3 billion tax on gambling companies. The industry and the larger financial sector are deeply concerned, causing a sudden decrease in market value.
The UK government is exploring the option of increasing taxes to tackle the mounting public debt and provide necessary support for social services. With the 2024 Autumn Budget on the horizon, the looming prospect of additional levies on gambling operators could reshape the sector’s future, causing damage to the horseracing sector in particular. One proposal under consideration is to increase the betting duty on bookmakers’ profits to 30 percent, effectively doubling the current rate.
What’s behind the surge in taxes?
The UK gambling industry is a significant contributor to the economy, generating revenue and employment opportunities. However, it is currently under scrutiny for its social impact, particularly concerning problem gambling and its effects on vulnerable individuals. In response, the UK government is increasing regulatory pressure on the sector.
This includes implementing reforms to advertising restrictions, affordability checks, and responsible gambling initiatives. Furthermore, there are indications that the government is considering additional tax increases because of the urgent need to fill public coffers.
The UK government’s primary focus is currently on using the Autumn Budget to explore various options for increasing revenue to plug the £22bn black hole in the UK economy. Reports suggest that chancellor Rachel Reeves is currently considering raising the Gross Gaming Revenue (GGR) tax, a levy imposed on the profits of gambling operators.
Currently, the GGR tax rate varies depending on the type of gambling activity, with the highest rates applying to remote gaming and betting companies. Any increase in this tax would likely have a significant impact on the sector’s profitability, which could affect consumer offerings and the industry’s ability to invest in responsible gambling initiatives.
The market reaction
Investors have been quick to react to these developments. Shares in major UK gambling companies, including household names like Entain, Flutter Entertainment, William Hill owner Evoke, and 888 Holdings, have all seen sharp declines. The collective market value of these firms has fallen over £2bn since the initial rumours of potential tax hikes began circulating. This sell-off reflects investor concerns that higher taxes will squeeze profit margins and could lead to reduced returns for shareholders.
The tax hike fears have also sparked broader anxiety about the long-term sustainability of the industry in its current form. The gambling sector is already navigating a challenging landscape of regulatory changes, including the recent review of the 2005 Gambling Act, which brought stricter rules for advertising, a ban on certain types of promotions, and increased scrutiny on the treatment of problem gamblers.
Industry reaction
The Betting and Gaming Council (BGC) responded vigorously to the proposals, with CEO Grainne Hurst claiming, “any further tax rises now will not only slam the breaks on growth for our sector, but it will threaten jobs and completely derail horseracing.”
She added, “Our industry is at a crossroads as we seek to implement the measures contained in the White Paper, measures that will cost our sector over £1bn. We also can’t ignore the new Levy on Research, Prevention and Treatment for problem gambling, which will raise £100m a year from bookmakers.
“After so many years of uncertainty, we need stability to deliver sustainable investment, not further change which threatens to undo that contribution. What is true for the BGC is also true for horseracing.” Grainne claimed the proposals were “fantasy economics,” and “not credible.” BGC members contribute £7.1bn to the economy, generating £4.2bn in tax, providing 110,000 jobs.
The British Horseracing Authority (BHA) chief executive Julie Harrington voiced her concern, “In light of the recent speculation about the possibility of increasing betting taxes, we must make clear to the government the potential unintended consequences of any such action. In particular, the potential to cause serious harm to racing’s revenue streams if gambling taxes were to be significantly increased.
“With the effects of the financial risk checks still to be fully felt, a substantial increase in betting taxes would not only damage racing’s finances, it could also have a real and lasting impact on communities across Britain.” Harrington also emphasised that British racing is frequently the primary source of employment in certain communities, and banning it would devastate these areas and hinder career prospects.
Harrington added, “Any weakening of racing’s finances would not only have a huge impact on the livelihoods of thousands of people, it would inevitably lead to our sport being diminished on the world stage. In turn, that will deprive the government of one of its greatest cultural assets and soft power levers.
“We would urge the new government to revisit the levy review at the earliest opportunity, and give serious consideration to the prospects for the future of the country’s second most-watched sport if it raises taxes significantly.”
A further burden on financial pressure
Grainne Hurst, the CEO of BGC, pointed out the harsh impact of financial difficulties on customers who are already struggling to make ends meet after taking care of essential expenses. She argues it is not the right time to further burden customers and increase the financial pressure they are already facing.
“Betting and gaming remains a hugely popular pastime in this country, with around 22.5 million people having a flutter each month, and it is enjoyed safely by the overwhelming majority. Our members are a great British export and genuine global leaders, delivering enormous economic good in city centres, on high streets and in the growing online sector.
“We want to partner with Government to see the right, proportionate regulations and a stable tax regime, which doesn’t hit customers, doesn’t raise the attraction of illegal operators and doesn’t derail the horseracing industry, but instead delivers on the Government’s growth agenda.
“Any new taxes now risk giving a leg-up to the lurking menace of the black market, which is hoovering up disaffected customers with eye catching offers but none of the protections that are in place in the regulated market.”
The global context
The UK is not the only country grappling with the challenge of balancing the economic benefits of a thriving gambling industry against the need for greater social responsibility. Globally, many countries are re-evaluating their approach to gambling regulation and taxation.
The global gambling industry is, therefore, at a crossroads. On one hand, technological advancements such as mobile apps and live betting have made gambling more accessible and popular than ever before. On the other hand, rising regulatory and tax burdens could limit the sector’s growth potential, particularly in established markets like the UK. The outcome of the UK’s Autumn Budget could set a precedent for other countries considering similar moves.
As the UK government weighs its options ahead of the Autumn Budget, the UK horseracing industry faces uncertainty. If the government increase the tax burden, the immediate impact will be lower profits for operators, less value in markets for customers and a further drop in share prices.
You can find the full Guardian article here.
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