Industry braces for double tax hike

22 October 2018

UK-facing gambling companies are bracing themselves for a double whammy in next week’s Budget with Chancellor Philip Hammond tipped to increase their overall tax burden despite new restrictions on FOBTs.

A rise in Remote Gaming Duty has been suggested for some time, with the Government apparently eager to ensure its contributions from the gambling sector are maintained beyond the FOBT stake reduction, likely to be imposed from next year.

Ahead of the Budget, which will take place next Monday (October 29), insiders have tipped the rate to rise from the current 15% of gross gaming yield to between 20-25%, with a report in the Financial Times over the weekend adding weight to those suggestions.

However, iGamingBusiness.com understands that an Ernst & Young report commissioned by the Remote Gambling Association (RGA) and provided to the Treasury estimates that the FOBT shortfall would be made up by a rate “below 20%”. Therefore, a rate of between 20-25% would see the sector increase its tax burden at a time when many operators are losing revenue currently provided by B2 machines.

“There is still a risk that HMT will set it higher to err on the side of caution,” an RGA source told iGamingBusiness.com.

The Financial Times claims that the tax rise would raise around £1bn over the course of the next five years.

The Chancellor is expected to give a date for the implementation of the FOBT stake reduction during the Budget, with the All-Party Parliamentary Group telling iGamingBusiness.com last week that the new rules should be implemented “no later than April 2019”.

Remote Gaming Duty was introduced in 2014 to ensure all licensed operators are taxed on bets made by UK-based customers regardless of their own location. At the time ministers expected to raise £300m a year, but the industry believes the figure is now about twice that sum, according to the FT.

The expected change comes as Ireland recently announced plans to double its own gambling tax from 1% to 2% of turnover. The Irish gambling sector expects thousands of job losses and shop closures to ensue.

Poland also taxes turnover, with the rate at 12%, which many consider to be off-putting to potential market entrants.

Spain charges a rate of 25% of gross gaming revenue, while Denmark is 20%. iGaming operators in New Jersey pay a taate of 15% of their gross gaming revenue, and 2.5% of GGR to the Casino Reinvestment Development Authority (CRDA).

Image: Chris McAndrew