UK casinos face a £5m hit from stealth tax, warns BGC. The gaming duty band freeze could impact jobs and growth in the sector. (Photo by Nataliya Vaitkevich on Pexels)
The UK government is allegedly conducting a covert tax raid (stealth tax) on casinos, according to the Betting and Gaming Council (BGC), which could cost the sector £5m annually.
The allegation is related to Chancellor of the Exchequer Jeremy Hunt’s autumn statement, which described the freezing of gaming duty bands. The BGC said that after the bands were frozen in March, some in the land-based casino industry had anticipated they would increase in line with inflation.
According to the BGC, the suspension of gaming duty bands will result in an increase in casino taxes of £25 million over the next five years. The BGC urged Hunt to reconsider, arguing that a duty band freeze would benefit an industry beleaguered by rising wages and high inflation.
Additionally, there is more bad news for the gambling sector, which is already dealing with the fallout from the government’s April publication of a gambling white paper. Consulting between the government and the iGaming industry continues on proposals to bring remote gambling (internet, telephone, TV and radio) into a single tax rather than taxing it through a three-tax structure.
Since April 2019, a tax of 21% of an operator’s UK customer profits has been levied on remote gaming, which is defined as playing a game of chance for a prize. Hunt will continue consulting with the iGaming company leaders to find a reasonable solution to reduce the burden on an already highly taxed industry. Other key discussion points include general and pool betting, not just remote gaming.
How will this affect the UK casino market? The list of highly recommended UK online casinos will likely grow shorter as the cost of doing business in the UK is already immensely high. We’ve lost Casino Cruise and Energy Casino from our list. Casino Cruise is now closed, while energy Casino still operates under a Malta Gaming Authority licensing certificate.
Suspension of Gaming Duty Bands will cost Casinos £5 million
The BCG organization estimates that over a year, the suspension of Gaming Duty Bands will cost casinos £5 million. According to the organization, BGC members currently support 110,000 jobs, generate £4.2 billion in tax revenue and contribute £7.1 billion to the UK economy overall. Since 2005, the gambling industry has lost 25% of UK casinos, from 160 to 117, with 4 recent closures, one of them Genting-owned Crawford’s in Mayfair, the oldest casino in the country.
The BCG maintains that a freeze or removal of the Duty Gaming Bands will contribute to faster recovery and speed up future growth. Eliminating it would give the land-based casino industry a much-needed boost at a critical moment. Critics of the tax maintain that keeping things as they are is a lost opportunity for businesses that could create jobs and attract investment across the nation.
More Challenges For the UK’s Gambling Entertainment Industry to Come
In the past several years, the iGaming industry has been hit with other challenges on top of the stealth tax. Initially, it was the pandemic, then the sharp rise in inflation, increased regulations, changes in marketing options/methods, increased competition/saturation, wage increases… the list is endless. To control costs, industry leaders have cut staff in order to keep shareholders content with profits. There is also the increased cost of cyber security and the integration of AI.
The head of the BCG, Michael Dugher, has warned that doing nothing will have a negative impact on sports. He said horse racing would suffer the most with higher taxes and lower profit margins. The fall-on effect would be that gamblers would have fewer options, and there would be less money to promote the sport.
He stated that the white paper started the negative measures and should be reconsidered. In another statement he reiterated that the current tax is a Trojan Horse that will increase taxes on gambling businesses.
White Paper is Ruffling Feathered!
The UK government’s white paper consultations continues to move forward. Yet, the stealth tax has ruffled a few feathers in the iGaming industry keen to revise the current tax laws. Since the release of the white paper last April, the BGC and the government have had 2 discussions. The first round looked at financial risk (design/ID verification/marketing), and the second involved direct submissions to the government that received over 3,000 suggestions. These submissions will be discussed in the next 12 weeks in hopes of optimistic resolutions/outcomes for the industry.
The BCG feels that the industry is overtaxed. If this continues, the UK gambling market will contract rather than grow, people will lose their jobs, there will be closures of more land-based casinos and they will lose their vital role in the hospitality/tourism sector. The BCG maintains it would be imprudent to keep this hidden tax in place while refusing to implement reforms enabling casinos to expand and hire more staff. Rethinking is urged by the BGC to allow Gaming Duty Bands to be adjusted for inflation at specific intervals.
Continued consultation and engagement regarding the stealth tax by both parties should resolve some or all of the ongoing disputes in the coming months.See the full report here Industry Urges Rethink On Continued Casino Stealth Tax.
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