Gambling regulators are, by very definition of their jobs, meant to be impartial when it comes to political debates around the industry, but the impartiality of regulators involved in Britain’s betting industry is being tested.

This is, of course, because of the tax debate – something our readers will be well versed in by now. Hardly a day has gone by where the topic of tax has not graced our website in some form or another as the budget announcement approaches on 26 November.

The discussion has seen countless voices involved – think tanks, charities, campaign groups, betting and gaming operators, trade bodies, horse racing, political figures like Gordon Brown and Nigel Farage, and now in a surprise turn, regulators.

Andrew Lyman, Gambling Commissioner with the Gibraltar government, and also a Non-Executive Director of the Independent Betting Adjudication Service (IBAS), took to LinkedIn late yesterday to make his opinion known.

“Because my role is primarily a regulatory one, I have, until today, remained silent in the debate on the rates of UK betting and remote gaming duty,” he wrote. “I think that the idea that the industry can absorb significant top line tax rises and not suffer wider structural impact and loss of bottom line profit is disingenuous.”

In Lyman’s assessment, there is very little room for UK gambling tax rates to increase without there being a huge impact on the sector and its economic contribution. In his post, he argues that there may be some potential for Remote Gaming Duty, the tax on online gambling, to up by ‘no more than 4-5 percentage points’, with options for General Betting Duty even more limited.

“Above that the pips will be beyond squeaking and there will be genuine pain. Pain will mean not just reduced growth, but as cogent examples demonstrate, tax yield would reduce in the medium term,” he said.

The post continued: “There is a tipping point and the nearer RGD gets to 30% the more amplified the economic impact and the chances of policy failure and irrecoverable damage to the sector. Once the regulated sector is gone it’s gone!”

Sportsbook scaremongering?

Rachel Reeves, Chancellor of the Exchequer, will announce the UK budget for the coming year on 26 November. She is widely expected to increase gambling taxes in some form, with the Treasury having consulted on a merger or harmonisation of gaming duties for many months now.

This consultation proposed a merger of Remote Gaming Duty (RGD, 21%), General Betting Duty (GBD, 15%) and Pool Betting Duty (PBD, 15%), to one single 21%. It can be assumed that this scenario would see Machine Gaming Duty (MGD) stay the same at 20%.

This consultation has ballooned into a far more wide ranging debate, one which has eclipsed the entire two-and-a-half year run of the Gambling Act review in intensity. Calls are now mounting for more drastic tax changes, with the Social Market Foundation (SMF) and Institute for Public Policy Research (IPPR) proposing an increase in MGD to 50% and RGD to 40%.

In his CEO Briefing this week, Andrew Rhodes, CEO of the UK Gambling Commission (UKGC), said: “What started as a harmonisation consultation has become a much bigger debate. It has brought more heat and attention around illegal gambling and how that is taking place in other countries.”

Earlier in the speech, he hinted at the UKGC’s regulatory remit amid this tax debate:

“Just as there is a very active debate about taxation and the sector at the moment, there is also a very active debate about the role of regulators and Arms Length Bodies and to what extent we stand between you and growth and to what extent we ensure a level playing field, which will no doubt be a consideration for the government as it considers the Commission’s future programme.”

The prospect of an increase in gambling taxes has sent the sector, and its traditional political allies in horse racing, into a campaigning frenzy. The Betting and Gaming Council (BGC) and some of its biggest members have been doing extensive media rounds, Betfred, Entain and Evoke being the biggest examples.

Operators’ warnings have become incredibly familiar to anyone who follows the industry. The abovementioned trio, which have the biggest presence on the UK high street with around 5,000 betting shops owned between them, has warned that hundreds of retail outlets could be closed once tax hikes escalate costs.

A comparison to the Netherlands is also often made, where a tax rate of 34.5% – set to rise to 37.5% in January next year – has led to what the industry claims is an exodus of customers to the black market and some businesses opting to pull out from the market, like LiveScore.

These arguments seem to be falling on deaf ears, however, with politicians and gambling reform campaigners labelling industry warnings as scaremongering to put off paying a higher tax bill.

“The risk of a rising UK black market is real and apparent,” Lyman observed. It is worth noting that, while the industry probably has leaned on the black market case too much in recent years, leading to politicians becoming numb to the argument, data does confirm its existence.

Just under 10% of UK gambling volume is estimated to go to black market companies. Also, Gamstop, the operator of the National Self-Exclusion Service, reported a couple of months ago that around one-tenth of self-excluded bettors were still gambling using unlicensed websites.

Gibraltar and UK gambling

Lyman weighing in on the tax debate is not quite as significant as if Andrew Rhodes of the UKGC had weighed in – that would be unprecedented given Rhodes’ regulatory remit in Great Britain.

It is still significant nonetheless, however, as Gibraltar has been brought up during the gambling tax debates. Last month, representatives from the SMF,IPPR and BGC, along with Suart Kenny, Co-Founder of Paddy Power and a staunch gambling reform advocate, appeared before the Treasury Select Committee in Westminster.

Aside from the conversation around UK gaming duties, the MPs of the Committee – a parliamentary body tasked with scrutinising the financial policies of HM Treasury – were interested in why so many UK bookmakers are tax domiciled in Gibraltar, a British Overseas Territory (BOT).

“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,” Kenny told the Committee. “That was closed off and the corporate rates of tax were lower.”

The Committee has now published a report based on the evidence given during last month’s constellation. In this report, it recommends that the Treasury examine where new ‘antiavoidance measures’ are needed to target licensed gaming companies that operate from low tax jurisdictions, like the gaming hubs of Gibraltar and Malta.

As some of Britain’s biggest online operators have a registration in Gibraltar – Betfred Online, BetVictor and bet365 being some notable examples – and the island being a BOT, it is unsurprising that its gaming authorities have been monitoring the tax situation closely, as Lyman himself notes.

“I am commenting because disproportionate UK tax rises have the capacity to harm the Gibraltar economy,” his post read, “Gibraltar is part of the British family and any UK tax rise is amplified in Gibraltar because UK regulated gambling is a key pillar of the economy.

“Gibraltar-based, UK-facing firms pay £750 million to the UK exchequer in gambling taxes (on a point of consumption basis). UK-facing, Gibraltar-based operators are dual regulated.

“UK political support for Gibraltar is best expressed by creating conditions that allow the Gibraltar economy to be self-sustaining. I still remain hopeful that politics (even internal party politics) will not trump sensible fiscal policy and economic literacy.

“Anybody who opines in this area steps into the minefield of conflicting and binary narratives.

“My motives are first and foremost to see a sensible outcome for both the UK and Gibraltar.”