The UK Treasury Select Committee has published its final views on the gambling sector, recommending a course of action for the government as an almost certain iGaming tax increase is on the horizon.

Following the recent Parliamentary hearing where pro-tax hike advocates clashed with Betting and Gaming Council (BGC) representatives, the Treasury outlined that government-mandated regulations need to “sharply differentiate” between in-person gambling (horseracing/arcades) and online games.

The latter, in the eyes of the Committee, was described as causing harm and addiction, while also failing to bring any benefit to community life.

“Different forms of gambling cause varying levels of harm to individuals, families and society. We are not convinced that current Treasury policy on the taxation of gambling captures the varying extent of those harms,” the report stated.

Grainne Hurst challenged on black market claims

There was some bad news for Grainne Hurst, CEO of the BGC, with the report seemingly lambasting her argument during the hearing that a higher gambling tax would heighten the prevalence of the black market.

At the hearing, she said that British users are already staking £4.3bn on the black market, citing a report by Frontier Economics.

The Parliamentary Commission’s report, however, countered that by bringing forward another paper by the Harm Reduction Journal where it’s said that advancing the narrative of a black market threat essentially constitutes a “regulatory resistance” – often using industry-backed evidence.

This was in fact the case in Hurst’s comments, as Frontier Economics was commissioned on behalf of the BGC to conduct its study.

The black market does, however, remain a significant threat to UK players, and this was still acknowledged by the Treasury Committee in its recommendation to the Government to examine more strategies around counter-acting it. 

In fact, the UK Gambling Commission (UKGC) already has a three-step action plan for assessing its size, albeit not comprehensively.

Offshore firms could get different treatment

The final and perhaps most interesting recommendation in the Committee’s statement was the potential implementation of “antiavoidance measures”, referring to licensed gambling companies with a UK customer base but operating from low-tax jurisdictions, such as Gibraltar and Malta.

During the previous hearing, Stewart Kenny, retired Co-Founder of Paddy Power and advocate for an online gambling tax increase, said: “Originally, the companies moved to Gibraltar, and we looked to move to Gibraltar—we looked at Malta and numerous other places—to avoid betting tax. That was closed off and the corporate rates of tax were lower.”

Stephen Hodgson, Chair of BGC’s Tax Committee, countered by noting that many UK-headquartered businesses paying UK corporate tax are also present in other markets like Gibraltar through subsidiaries that pay local corporate tax there.

Save the date

To conclude, the widely circulated prediction among experts is that in-person betting and particularly betting on horse racing will be spared from a rise tax by the Chancellor of the Exchequer, Rachel Reeves.

The iGaming sector, however, is expected to bite the bullet – with the Machine Gaming Duty and the Remote Gaming Duty specifically touted for a tax increase. The saga will conclude once Reeves announces next year’s Budget on 26 November.