UK Budget 2014: bingo, FOBTs, point of consumption tax

20 March 2014

UK chancellor George Osborne has announced a number of new tax laws for the UK gambling industry in the government's Budget 2014.

The government announced that the tax rate of fixed-odds betting terminals (FOBTs) would be increased to 25%, bingo duty would be cut to 10% and that it will proceed with plans to introduce a 15% point of consumption tax for remote gambling.

UK bookmakers in particular were hit with the announcement that the tax rate for FOBTs will be increased from its current rate of 20% to a new rate of 25%.

Shortly after this was confirmed, the share prices of bookmakers Ladbrokes and William Hill fell by 12% and 7%, respectively.

The increase in FOBT duty has come in response to heavy criticism of the machines, which have been cited as a source of gambling problems by MPs and campaigners alike.

However, the Campaign for Fairer Gambling lobby group said that the tax hike will do "little" to help problem gamblers in the UK.

Adrian Parkinson, consultant for the Campaign for Fairer Gambling, said: “A 25% tax rate on FOBTs may well wipe £78 million off the bookmakers’ profits – but does little to protect those affected by problem gambling.

“It will be suggested that this move will slow down the proliferation of betting shops on high streets, but the addictive nature of FOBTs means the bookmakers will still be raking in huge sums.

“The government should be looking at dealing with the root of the problem - the high stakes and high intensity play of FOBTs, rather than tax the losses of those addicted to them.”

Meanwhile Osborne said that a cut in bingo duty from 20% to 10% was prompted by the fact that the number of bingo halls in the UK had “plummeted by three quarters over the last 30 years”.

Shortly after the cut in duty was announced, British gambling operator Rank Group unveiled plans for three new bingo clubs in the UK.

Rank, which already operates 97 Mecca Bingo clubs in the UK, said that as a result of the duty change, it was now able to invest in “modernisation” of the bingo industry through the development of these new clubs.

“Today's announcement is an important boost for Britain's bingo clubs, which provide a range of social and economic benefits for the communities they serve,” Rank chief executive officer Ian Burke said.

“By bringing bingo duty into line with other forms of gaming entertainment, the government has created a basis for renewed investment and innovation.”

In addition, the government also confirmed that it is to go ahead with a proposal to introduce a point of consumption tax rate of 15% for remote gambling.

From December 2014, operators will have to pay 15% on the gross profits they make from bets placed by punters located in the UK.

Online gambling trade organisation the Remote Gambling Association (RGA) has hit out over the rate and claimed that it could have a negative impact on the UK.

The RGA said it could mean that firms are unable to recover costs and could go out of business, or a large number of UK customers may switch to buying gambling products from “offshore duty avoiding providers” as they can offer more attractive products.

The RGA also warned that if either of these problems do happen, then it may be difficult to reverse the consequences with a subsequent reduction in tax rate.

Clive Hawkswood, chief executive of the RGA, added: “We have repeatedly said that the reason that the vast majority of well-known British companies operate from other jurisdictions is that the UK tax burden is unreasonably heavy and makes it very difficult to compete in the international market.

“This new regime has given the Government the perfect opportunity to correct past mistakes and it is very worrying that despite all the evidence it has not done so.

“Not only KPMG, but other respected experts at PwC and Deloitte, have all reached the same conclusion that any rate above 10% GPT is not sustainable in the long-term. 

“We will continue to engage with HM Treasury in pursuit of what we believe should be the common objective of establishing a viable long term UK market where licensed and tax-paying companies can not only survive but thrive.”

Related article: House of Lords gives final approval to new UK gambling bill