The prospect of UK betting tax rates being hiked in next month’s budget is looking increasingly likely, and the industry seems to be getting a chilly reception from politicians with a say on the matter.

A parliamentary hearing in front of the Treasury Committee put that tension up for public display earlier today, 28 October, when a number of MPs heard from both pro-tax advocates and industry representatives trying to stand their ground defending the current rates.

Fighting from the blue corner were Carsten Jung, Director for Economic Policy at the Institute for Public Policy Research (IPPR); Dr Theo Bertram, Director at Social Market Foundation; and Stewart Kenny, Co-Founder of Paddy Power – all three seeing a need for more taxation.

Opposite them, and representing the UK’s multi-billion pound betting industry, were two senior figures from the Betting and Gaming Council (BGC) – Stephen Hodgson, Chair of the standards body’s Tax Committee, and Grainne Hurst, the organisation’s CEO.

Advocates for a heavier betting tax were given the first half of the two-hour session. To the question why he believes gambling is undertaxed, Jung argued that some types of gambling are more harmful than others, and that this should be reflected within the tax regime.

He further compared those high levels of risk to alcohol and tobacco, which are taxed based on their social harms. However, Jung reserved the IPPR’s vision for the most drastic tax hikes to online gambling, not brick-and-mortar and horse racing betting.

“Gambling is a social harm … and we do tax other social harms as a result, from alcohol to tobacco,” he said. “We recognise that these are not normal goods, they have a societal impact, and that is why we propose an increase in gambling taxation, to make up for the social harms.

“We particularly focus on remote gambling, not the bricks and mortar type, not the horse racing type – people sitting at home gambling, either online slot machines or other types.”

This would mean raising the remote gaming duty to be raised from 21% to 50%, machine games duty (slot machine types) from 20% to 50%, and the general betting duty from 15% to 25%.

Gambling reform on racing’s side?

Theo Bertram from the Social Market Foundation backed Jung’s sentiment by saying that he views slot machines and online casinos at the top of the harm scale, with horse racing being towards the bottom. 

Bertram told the Treasury MPs that the IPPR and SMF’s proposal would actually see more tax from the racing sector to funnel back to the sector rather than the Treasury.

Stewart Kenny, one of the co-founders of Paddy Power back in the late 1980s, was the last to throw the glove, saying that sports betting is less harmful than playing any type of slot. 

He said: “There are two ways of seeing if a product is addictive – how quick is the result after the investment, and how quickly you can repeat the dose.

“One message is clear – the parts of the industry that have the most harm should be taxed the highest,” Kenny added.

Discussing whether higher taxes will reduce the rate of problem gambling, Jung added: “It depends to what extent gambling becomes more expensive, which could lead to less players, subsequently reducing the risks of gambling.”

BGC makes case against betting tax

Taking on the stage in the second half of the inquiry, the BGC”s Hodgson countered by saying that the industry is already being subjected to a high level of tax rate “in excess of 80%” – consisting corporation tax, business rates, NIC employee tax, VAT, betting duty, machine gaming duty, statutory levy, and more.

Hurst later refused to agree with the idea that any part of gambling can be considered a contributor to social harm, one argument for that being a recent UK Gambling Commission (UKGC) study where 72% of surveyed said to gamble for fun – not out of the necessity to win or chase money.

Furthermore, Hurst made sure to highlight that the industry has been diligently following the recommendations set out in the Gambling Act White Paper review – something that the sector supported from start to finish.

Hurst reminded MPs that the review introduced 63 additional workstreams and regulations, which operators are required to follow. Proactive measures to prevent problem gambling include tracking behavioural triggers, late night play, loss chasing, among others. 

“The industry has a lot of regulations in place voluntarily and the white paper to raise those standards,” the BGC’s CEO said. “We track behavioural triggers, late night play, chasing losses, so we make sure players are staying within the regulated space.”

In the first half of the inquiry, 53% were quoted as the tax rate currently in the US state of Denver. With the average effective betting levy capped at 22% in the UK within a similar economy to that of America, Hurst was asked how would companies adapt to a higher rate.

She added that the cost for the final customer would increase, RTP would go down, and players will eventually move to the black market – which according to Hurst already generates £4.3bn from UK consumers and starving the Treasury of £67m per year.

Unsurprisingly, big name UK PLCs like Evoke and Entain have mobilised themselves over the last few weeks to warn about potential massive layoffs and high street shop closures if Labour moves on with the tax increase.

“It would be counterproductive to raise the taxes to those levels,” Hodgson signed off.

The sector will find out whether it will see betting tax rates increase, and by how much, when Chancellor of the Exchequer, Rachel Reeves, announces the Autumn Budget on 26 November.

However, it was notable that the MPs of the Treasury Committee did not appear overly receptive to industry arguments and BGC-commissioned research throughout today’s hearing.

This, coupled with Reeves’ need to stack up the public pursuit likely outweighing other industries’ and interest groups’ considerations, may suggest that bookmakers’ fate in the betting tax debate has already been sealed.