There’s still little insight into whether a recently surfaced proposal for a gambling tax raise would benefit the UK, analysts have warned.

A recent proposal by the Institute for Public Policy Research (IPPR) to significantly raise gambling taxes in favour of a theoretical £3bn more for the national treasury was put under the microscope by market analyst firm, Tax Policy Associates.

The proposal attracted extra eyes after it was referenced by Former Prime Minister and Chancellor of the Exchequer, Gordon Brown, who argued that the money can be used to alleviate poverty among British children.

However, Tax Policy Associates has warned that the IPPR’s calculations are merely illustrative and limited in scope, with more detailed analysis required to effectively evaluate any proposed tax hikes.

Are the odds against the Treasury?

As a reminder, the UK Treasury is evaluating whether to merge  the three existing types of gaming tax and equating them to the Remote Gaming Duty’s current 21% – essentially raising the Pool Betting Duty and the General Betting Duty up from 15%.

The IPPR paper is now proposing an increase to Remote Gaming Duty from 21% to 50%, and General Betting Duty up from 15% to 25%. Expectations from that scenario are that gambling companies will protect their margins by shortening odds, with gamblers bearing the burden of the tax hike.

Worsening the odds will bring down revenue but ensure that gambling providers retain greater profits, the IPPR establishes in its vision, which uses a “price elasticity of demand” of -0.5 as a point of reference for its estimates.

However, Tax Policy Associates warns that this will eventually hit a limit when odds become impossible. Though not a direct comparison, similar measures have been seen in response to tax changes in the US, with FanDuel putting a ¢50 customer fee on all bets taken in Illinois in response to a new pre-bet tax in that state.

“As the price elasticity rises beyond -0.5, gambling firms have to make the odds worse and worse to keep their margins. But there’s a limit – eventually the odds become impossible.”

The analyst firm showcased an example elasticity of -0.75, where the customer win-rate drops from the current 85% to 2% – deadly for gambling businesses as few will agree to play at such rates.

“It’s unlikely anyone would gamble in such a scenario. And beyond -0.75, it becomes impossible to maintain margins with this strategy.”

Bookies and politicians weigh in

This then presents the issue that if bookmakers make odds worse and less appealing for customers, revenue will in turn drop and as a result of this tax returns may drop.

Of course, bookmakers will have their bottom lines and shareholder value in mind when presenting their case, but this is still a prospect the government should keep in mind ahead of the Autumn budget announcement.

Quoted by The Telegraph, Peter Jackson, CEO of Flutter Entertainment, said: “Raising taxes is not straightforward and we have operational experience around the world whereby if you continue to push tax rates up, you actually see a reduction in the tax take. 

“This is the case in the Netherlands, for example, where the government is facing a €200m (£173m) shortfall.”

Raising gambling taxes has also drawn criticism from political figures. Louie French MP took a direct jab at Labour on Twitter, saying: “Labour’s short sighted tax raid will only fuel the black market, hurting jobs, British sports and punters.”

The UK’s regulated gambling industry supports over 100,000 jobs, contributes billions to the economy each year and is a major sponsor of our much loved sports.

Labour’s short sighted tax raid will only fuel the black market, hurting jobs, British sports and punters.

— Louie French MP (@louie_french) August 8, 2025

More questions than answers

Tax Policy Associates also questioned whether the -0.5 figure is the correct one to use overall, citing a 2014 study from the HMRC that reviewed remote gaming duty elasticities of up to -1.8.

Based on those figures, the whole yield will be halved to £1.5bn from the expected £3bn by the IPPR. Therefore, Tax Policy Associates has called for further review into more potential outcomes, and has warned against the overreliance on the -0.5 elasticity.

“Given the dependence on the -0.5 figure, it is therefore unfortunate that the IPPR presents only one scenario. It would be preferable to admit the uncertainty and discuss the range of possible outcomes.”

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